<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-14331
MERISTAR HOTELS & RESORTS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 51-0379982
(STATE OF INCORPORATION) (IRS EMPLOYER IDENTIFICATION NO.)
1010 WISCONSIN AVENUE, N.W.
WASHINGTON, D.C. 20007
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)(ZIP CODE)
202-965-4455
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NONE
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period for which the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
The number of shares of Common Stock, par value $0.01 per share,
outstanding at May 6, 1999 was 27,401,935.
<PAGE>
MERISTAR HOTELS & RESORTS, INC.
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS (UNAUDITED)
Condensed Consolidated Balance Sheets -
March 31, 1999 and December 31, 1998 3
Condensed Consolidated Statements of Operations -
Three Months Ended March 31, 1999 and 1998 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1999 and 1998 5
Notes to Condensed Consolidated Financial Statements 6
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK 14
PART II. OTHER INFORMATION
ITEM 5: OTHER INFORMATION 14
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K 14
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
MERISTAR HOTELS & RESORTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
--------------- ------------------
(unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 7,806 $ 11,155
Accounts receivable, net of allowance for doubtful
accounts of $3,232 and $2,285 78,219 61,987
Prepaid expenses 3,832 4,193
Deposits and other 12,680 11,085
-------- --------
Total current assets 102,537 88,420
Fixed assets:
Furniture, fixtures, and equipment 8,119 7,325
Accumulated depreciation (1,426) (1,099)
-------- --------
Total fixed assets, net 6,693 6,226
Investments in and advances to affiliates 19,309 5,495
Intangible assets, net of accumulated
amortization of $4,482 and $3,338 145,797 146,782
Restricted cash 42 606
-------- --------
$274,378 $247,529
======== ========
Liabilities, Minority Interests, and Stockholders' Equity
Current Liabilities:
Accounts payable $ 33,821 $ 28,401
Accrued expenses and other liabilities 84,370 70,016
Due to affiliates, net 25,363 7,437
Income taxes payable 69 69
Long-term debt, current portion 19 27
-------- --------
Total current liabilities 143,642 105,950
Deferred income taxes 9,058 9,367
Long-term debt 57,623 67,785
-------- --------
Total liabilities 210,323 183,102
Minority interests 19,533 19,693
Commitments and contingencies
Stockholders' equity:
Common stock, par value $.01 per share:
Authorized - 100,000 shares
Issued and outstanding - 25,525 and 25,437 shares 255 254
Paid-in capital 44,181 43,929
Retained earnings 86 551
-------- --------
Total Stockholders' equity 44,522 44,734
-------- --------
$274,378 $247,529
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
MERISTAR HOTELS & RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
INCLUDING PREDECESSOR ENTITY
UNAUDITED (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------
1999 1998
---- ----
<S> <C> <C>
Revenue:
Rooms $228,313 $23,404
Food and beverage 72,313 1,357
Other operating departments 23,367 1,219
Management and other fees 1,845 4,150
-------- -------
Total revenue 325,838 30,130
-------- -------
Operating expenses by department:
Rooms 51,973 5,124
Food and beverage 55,061 995
Other operating expenses 11,834 498
Undistributed operating expenses:
Administrative and general 51,391 6,963
Property operating costs 47,464 4,142
Participating lease expense 106,275 10,655
Depreciation and amortization 1,549 421
-------- -------
Total operating expenses 325,547 28,798
-------- -------
Net operating income 291 1,332
Interest expense, net 1,226 18
Equity in earnings of affiliates - (521)
-------- -------
Income (loss) before minority interests
and income taxes (935) 793
Minority interests (161) 35
Income taxes (309) -
-------- -------
Net income (loss) $ (465) $ 758
-------- -------
Earnings per share :
Basic $ (0.02) N/A
Diluted $ (0.02) N/A
========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
MERISTAR HOTELS & RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
INCLUDING PREDECESSOR ENTITY
UNAUDITED (IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------
1999 1998
-------- -------
<S> <C> <C>
Operating activities:
Net income (loss) $ (465) $ 758
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 1,549 421
Equity in earnings of affiliates - 521
Minority interests (161) 35
Deferred income taxes (309) -
Changes in operating assets and liabilities:
Accounts receivable, net (16,232) 493
Deposits and other (1,595) 47
Prepaid expenses 361 124
Cash and cash equivalents held on behalf of affiliates - 649
Accounts payable 5,420 (182)
Accrued expenses and other liabilities 14,354 3,809
Due to affiliates, net 17,926 (3,915)
-------- -------
Net cash provided by operating activities 20,848 2,760
-------- -------
Investing activities:
Purchases of fixed assets, net (864) (697)
Investments in and advances to affiliates (13,814) -
Purchases of intangible assets (159) (119)
Distributions from investments in affiliates - 490
Change in restricted cash 564 -
-------- -------
Net cash used in investing activities (14,273) (326)
-------- -------
Financing activities:
Principal payments on long term debt (10,170) (205)
Proceeds from issuances of common stock, net 246 -
-------- -------
Net cash used in financing activities (9,924) (205)
-------- -------
Net increase (decrease) in cash and cash equivalents (3,349) 2,229
Cash and cash equivalents, beginning of period 11,155 2,477
-------- -------
Cash and cash equivalents, end of period $ 7,806 $ 4,706
-------- -------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
MERISTAR HOTELS & RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
(UNAUDITED, DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
1. ORGANIZATION
MeriStar Hotels & Resorts, Inc. (the "Company") was spun off by Capstar Hotel
Company ("CapStar") on August 3, 1998 (the "Spin-Off") to become the lessee,
manager and operator of various hotel assets, including those which were
previously owned, leased and managed by CapStar and certain of its affiliates.
CapStar distributed to its stockholders, on a share-for-share basis, all of the
outstanding shares of the Company's common stock, par value $0.01 per share
("Common Stock"). On August 3, 1998, CapStar merged (the "Merger") with and
into American General Hospitality Corporation ("AGH"), a Maryland corporation
operating as a real estate investment trust, to form MeriStar Hospitality
Corporation (the "REIT").
Immediately following the Spin-Off and the Merger, the Company acquired 100% of
the partnership interests in AGH Leasing, L.P. ("AGH Leasing"), the third-party
lessee of most of the hotels owned by AGH, and acquired substantially all of the
assets and certain liabilities of American General Hospitality, Inc. ("AGHI"),
the third-party manager of most of the hotels owned by AGH and certain other
hotels. The Company thereby became the lessee, manager and operator of most of
the hotels owned by AGH. The purchase price of $95,000 was funded with a
combination of cash and units of limited partnership interest ("OP Units") in
the Company's subsidiary operating partnership. In accordance with generally
accepted accounting principles ("GAAP"), the acquisitions have been accounted
for as a purchase and therefore, the operating results of AGHI and AGH Leasing
are included in the Company's consolidated financial statements from the date of
acquisition.
Pursuant to an intercompany agreement, the Company and the REIT provide each
other with, among other things, reciprocal rights to participate in certain
transactions entered into by each party. In particular, the Company has a right
of first refusal to become the lessee of any real property acquired by the REIT.
The Company also provides the REIT with certain services including
administrative, corporate, accounting, financial, insurance, legal, tax, data
processing, human resources, acquisition identification and due diligence, and
operational services, for which the Company is compensated in an amount that the
REIT would be charged by an unaffiliated third party for comparable services.
As of March 31, 1999, the Company leased or managed 203 hotels with 42,583 rooms
in 34 states, the District of Columbia, Canada and the U.S. Virgin Islands.
The consolidated interim financial statements of the Company for the three
months ended March 31, 1998 include the historical results of the Company's
predecessor entity, the management and leasing operations of CapStar. The
operating results of AGHI and AGH Leasing have been included in the Company's
consolidated financial statements since August 3, 1998.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying condensed consolidated interim financial statements have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission ("SEC"). Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles ("GAAP") have been omitted
pursuant to such rules and regulations. The unaudited condensed consolidated
interim financial statements should be read in conjunction with the financial
statements, notes thereto and other information included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1998. Certain 1998 amounts
have been reclassified to conform to 1999 presentation.
6
<PAGE>
The accompanying unaudited condensed consolidated interim financial statements
reflect, in the opinion of management, all adjustments, which are of a normal
and recurring nature, necessary for a fair presentation of the financial
condition and results of operations and cash flows for the periods presented.
The preparation of financial statements in accordance with GAAP requires
management to make estimates and assumptions. Such estimates and assumptions
affect the reported amounts of assets and liabilities, as well as the disclosure
of contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates. The results of operations for the
interim periods are not necessarily indicative of the results for the entire
year.
The Company's participating leases have noncancelable remaining terms ranging
from 10 to 15 years , subject to earlier termination on the occurrence of
certain contingencies, as defined. The rent payable under each participating
lease is the greater of base rent or percentage rent, as defined. Percentage
rent applicable to room and food and beverage hotel revenue varies by lease and
is calculated by multiplying fixed percentages by the total amounts of such
revenues over specified threshold amounts. Both the minimum rent and the revenue
thresholds used in computing percentage rents are subject to annual adjustments
based on increases in the United States Consumer Price Index. Percentage rent
applicable to other revenues is calculated by multiplying fixed percentages by
the total amounts of such revenues.
In May 1998, the Emerging Issues Task Force ("EITF") reached a consensus on
Issue No. 98-9, "Accounting for Contingent Rent in Interim Financial Periods".
EITF No. 98-9 affects the recognition of contingent rental expense in interim
periods. This pronouncement requires a lessee to recognize contingent rental
expense for interim periods prior to the achievement of the specified target
that triggers the contingent rental expense, if the achievement of that target
by the end of the fiscal year is considered probable. This accounting
pronouncement relates only to the Company's recognition of lease expense in
interim periods for financial reporting purposes; it has no effect on the timing
of rent payments under the Company's leases or the Company's annual lease
expense calculations. The Company adopted EITF No. 98-9 effective July 1, 1998.
Under the provisions of EITF No. 98-9, the Company has recognized $3.9 million
of additional lease expense as of March 31, 1999. This amount is included in
accrued expenses and other liabilities on the Company's condensed consolidated
balance sheet. The effect of EITF No. 98-9 on the Company's financial statements
is as follows:
<TABLE>
<CAPTION>
Before Effect After
Effect of of Effect of
EITF No.98-9 EITF No. 98-9 EITF No. 98-9
------------- -------------- --------------
<S> <C> <C> <C>
Net operating income $ 4,211 $(3,920) $ 291
Interest expense, net (1,226) - (1,226)
Minority interest (512) 673 161
Income taxes (989) 1,298 309
------- ------- -------
Net income (loss) $ 1,484 $(1,949) $ (465)
======= ======= =======
Diluted EPS $ 0.06 $ (0.02)
======= =======
</TABLE>
7
<PAGE>
3. EARNINGS PER SHARE
Earnings per share ("EPS") has been calculated using net income for the three
months ended March 31, 1999. Prior to the Spin-Off, the predecessor entities of
the Company were partnerships. Accordingly, no EPS has been calculated for the
three months ended March 31, 1998. The following table presents the computation
of basic and diluted EPS for the three months ended March 31, 1999:
BASIC AND DILUTED EPS
COMPUTATION:
<TABLE>
<CAPTION>
<S> <C>
Net loss $ (465)
Weighted average number of shares
of Common Stock outstanding 25,485
-----------
Basic and Diluted EPS $ (0.02)
===========
</TABLE>
4. SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------
1999 1998
---- ----
<S> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid for interest $1,469 $18
</TABLE>
5. SEGMENTS
The Company is organized into three primary operating divisions. Each division
is managed separately because of its distinctive products and services offered
by the hotel properties within the operating division. These operating
divisions are the Company's three reportable operating segments: upscale, full-
service hotels ("Hotels"); premium limited-service hotels and inns ("Inns"); and
resort properties ("Resorts"). The Company's management evaluates performance
of each segment based on earnings before interest taxes, depreciation, and
amortization ("EBITDA"). The accounting policies of the segments are the same
as those described in the summary of significant accounting policies.
The Company's financial condition and results of operations as of March 31, 1999
and December 31, 1998 and for the three-months ended March 31, 1999 and 1998
reflect significantly differing numbers of managed and leased hotels throughout
the periods. Consequently, the Company has determined that it is not
practicable to present the segment information of the management and leasing
operations of CapStar, its predecessor entity, for the three months ended March
31, 1998. Also, prior to the Spin-Off, the management and leasing operations of
CapStar conducted its business primarily in only one operating segment.
Therefore, the segment disclosures presented below are for the three months
ended March 31, 1999.
<TABLE>
<CAPTION>
HOTELS INNS RESORTS TOTAL SEGMENTS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $191,333 $43,816 $84,915 $320,064
============= ============ ============= ================
Participating Lease Expense $ 64,892 $18,100 $23,283 $106,275
============= ============ ============= ================
EBITDA $ (4,041) $ 170 $10,238 $ 6,367
============= ============ ============= ================
Total Assets $ 59,495 $14,640 $25,654 $ 99,789
============= ============ ============= ================
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
The following is a reconciliation of the segment information to the Company's
consolidated data:
<TABLE>
<CAPTION>
Participating
REVENUES Lease Expense EBITDA ASSETS
------------------------------------------------------------
<S> <C> <C> <C> <C>
Total Segments $320,064 $106,275 $ 6,367 $ 99,789
Other Items 5,774 - (4,527) 174,589
------------------------------------------------------------
Per Financial Statements $325,838 $106,275 $ 1,840 $274,378
============================================================
</TABLE>
The other items in the table above represent non-operating segment activity
and assets. These are primarily unallocated corporate expenses and non-segment
activities, and intangible and other miscellaneous assets.
Revenues for Canadian operations totaled $4,484 for the three-month period ended
March 31, 1999.
6. INVESTMENTS IN AND ADVANCES TO AFFILIATES
During January 1999, the Company purchased from the REIT a 50% investment in a
joint venture which owns the 443-room Radisson Hotel & Suites Downtown in St.
Louis, Missouri, for a price of $7,200.
During March 1999, the Company invested $2,500 as an equity investment in
a joint venture established to acquire upscale, full-service hotels. The
Company's ultimate investment in this joint venture will be up to $10,000. The
Company will manage all hotels acquired by the joint venture. As part of the
joint venture transaction, the Company sold $5,000 of its common stock to the
joint venture partner at a price of $2.75 per share on April 15, 1999. When the
joint venture reaches $200,000 in invested assets, that joint venture partner
has the right to acquire up to an additional $5,000 of common stock at fair
market value, based on a 20-day pricing period.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
On August 3, 1998, CapStar Hotel Company ("CapStar") spun-off (the "Spin-Off")
its management and leasing operations in a taxable transaction in which CapStar
distributed on a share-for-share basis all shares of common stock, par value
$0.01 per share, ("Common Stock") of MeriStar Hotels & Resorts, Inc. (the
"Company"). The Company thereby became the lessee, manager and operator of
various hotel assets, including those which were previously owned, leased and
managed by CapStar and certain of its affiliates. On August 3, 1998, CapStar
merged (the "Merger") with and into American General Hospitality Corporation
("AGH"), a Maryland corporation operating as a real estate investment trust, to
form MeriStar Hospitality Corporation (the "REIT").
Immediately following the Spin-Off and the Merger, the Company acquired 100% of
the partnership interests in AGH Leasing, L.P. ("AGH Leasing"), the third-party
lessee of most of the hotels owned by AGH, and substantially all of the assets
and liabilities of American General Hospitality, Inc. ("AGHI"), the third-party
manager of most of the AGH hotels. As a result, the Company became the lessee
and manager of most of the hotels owned by the REIT. The purchase price of $95.0
million was paid with a combination of cash and units of limited partnership
interest ("OP Units") in the Company's subsidiary operating partnerships. In
accordance with generally accepted accounting principles, the acquisitions have
been accounted for as a purchase and therefore, the operating results of AGHI
and AGH Leasing have been included in the Company's consolidated financial
statements since the date of acquisition.
The Company's financial statements include the historical results of the
Company's predecessor entity, the management and leasing operations of CapStar,
for all periods in the year ended December 31, 1998 and include the operating
results of AGH Leasing and AGHI for the period August 3, 1998 through December
31, 1998. In addition, prior to August 3, 1998, the Company managed
substantially all of the hotels owned by CapStar and received management fee
revenues from such hotels. Since August 3, 1998, the Company has leased these
hotels from the REIT and therefore records no management fees from such hotels
but instead records room, food and beverage and other operating department
revenues and expenses from such leases. Therefore, the Company's results of
operations for the periods ended March 31, 1999 and 1998 reflect significantly
differing numbers of managed and leased hotels throughout the periods. The
following table outlines the Company's historical portfolio of managed and
leased hotels:
<TABLE>
<CAPTION>
REIT CAPSTAR THIRD PARTY OTHER
LEASED MANAGED MANAGED LEASED TOTAL
------------------------------------------------------------------------------
HOTELS ROOMS HOTELS ROOMS HOTELS ROOMS HOTELS ROOMS HOTELS ROOMS
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3/31/99 109 28,175 -- -- 41 6,800 53 7,608 203 42,583
12/31/98 109 28,058 -- -- 41 6,800 53 7,608 203 42,466
3/31/98 -- -- 55 14,414 40 6,899 45 6,410 140 27,723
12/31/97 -- -- 47 12,019 27 4,631 40 5,687 114 22,337
</TABLE>
FINANCIAL CONDITION
MARCH 31, 1999 COMPARED WITH DECEMBER 31, 1998
Total assets increased by $26.9 million to $274.4 million at March 31, 1999 from
$247.5 million at December 31, 1998. Total liabilities increased by $27.2
million to $210.3 million from $183.1 million. The increase in assets primarily
results from a $16.2 million increase in accounts receivable and a $13.8 million
increase in investments in and advances to affiliates. The increase in accounts
receivable is due to higher sales volume during the period. The increase in
investments in and advances to affiliates is a result of the Company's purchase
of a 50% equity investment in a joint venture and other hotel partnerships. The
increase in liabilities primarily results from a $14.4 million increase in
accrued expenses and other liabilities due to increased sales volume and a $17.9
million increase in due to affiliates, primarily representing a higher amount of
participating lease payable at March 31, 1999 versus December 31, 1998,
partially offset by a $10.2 million decrease in long-term debt.
10
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1998
Total revenue increased by $295.7 million to $325.8 million in the three-month
period ended March 31, 1999 compared to $30.1 million in the three-month period
ended March 31, 1998. This increase results from the increase in the number of
hotels leased as described above.
Operating expenses increased $296.7 to $325.5 million in the three months ended
March 31,1999 compared to $28.8 million in the three months ended March 31,
1998. The increase reflects the greater number of leased and managed hotels,
and includes the costs of additional personnel and other administrative costs
incurred in conjunction with the Company's growth.
Net operating income decreased $1.0 million, to approximately $0.3 million in
the three-months ended March 31, 1999 compared to $1.3 million in the three
months ended March 31, 1998. The decrease in net operating income is due to the
change in the types of revenues and expenses recorded in the Company's financial
statements in periods before and after the Merger.
EBITDA for the Company's three operating segments for the three months ended
March 31, 1999 is as follows:
<TABLE>
<CAPTION>
Total
Hotels Inns Resorts Segments
------ ---- ------- --------
<S> <C> <C> <C> <C>
EBITDA.......................... $(4,041) $170 $10,238 $6,367
</TABLE>
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's continuing operations are funded through cash generated from hotel
management and leasing operations. Business acquisitions and investments in
affiliates are financed through a combination of internally generated cash,
external borrowings and the issuance of OP Units and/or Common Stock.
Operating activities provided $20.9 million of net cash in the three-months
ended March 31, 1999, mainly due to higher accrued expenses and other
liabilities. The Company used $14.3 million of cash in investing activities for
the first three months of 1999, primarily for the investments in hotel
partnerships. Net cash used by financing activities of $9.9 million resulted
primarily from principal payments on long-term debt.
On March 3, 1999, the Company amended their unsecured revolving credit facility
(the "Credit Facility") with the REIT to increase the total borrowings available
under the Credit Facility to $100.0 million. At March 31, 1999, the Company had
available $43.0 million under the Credit Facility. As of May 6, 1999, the
Company had available $44.5 million under the Credit Facility.
On April 15, 1999, the Company issued $5 million of common stock through a
private placement. The stock was issued at a price of $2.75 per share. The
proceeds from this sale of stock were used to pay down debt on the Credit
Facility.
Under the terms of the participating leases and management agreements between
the Company and lessors or third-party owners, the lessors and third-party
owners will generally be required to fund significant capital expenditures at
the hotels operated by the Company.
The Company believes cash generated by operations, together with anticipated
borrowing capacity under the Credit Facility, will be sufficient to fund its
existing working capital, ongoing capital expenditures, and debt service
requirements. In addition, the Company expects to continue to seek acquisitions
of hotel management businesses and management contracts. The Company expects to
finance these future acquisitions through a combination of anticipated borrowing
capacity under its credit facility and the issuance of OP Units and/or Common
Stock. The Company believes these sources of capital will be sufficient to
provide for the Company's long-term capital needs.
SEASONALITY
Demand in the lodging industry is affected by recurring seasonal patterns.
Demand is lower in the winter months due to decreased travel and higher in the
spring and summer months during peak travel season. Therefore, the Company's
operations are seasonal in nature. Assuming other factors remain constant and
excluding resort hotel properties and the effect of EITF 98-9 on reporting in
interim periods, the Company has lower revenue, operating income and cash flow
in the first and fourth quarters and higher revenue, operating income and cash
flow in the second and third quarters.
YEAR 2000 CONVERSION
The Company is in the process of conducting a review of its computer
systems to identify the systems that could be affected by the "Year 2000"
problem and has initiated an implementation plan to address the problem. The
Year 2000 problem is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
programs that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. If not corrected, this could result in
a major systems failure or miscalculations.
The Company's leased and managed hotel properties contain various
information technology and embedded technology systems. Both types of systems
contain microprocessors and microcontrollers that must be assessed for Year 2000
compliance. The Company has developed a comprehensive implementation plan to
address the potential Year 2000 problems caused by such systems. This plan
involves six stages: increase awareness of issue; assign responsibility for
coordinating response to issue; information collection; analysis; modification,
repair or replacement; and testing. The Company is currently in its analysis
stage, and expects to complete this stage in May 1999. As the Company progresses
through the analysis stage, it has also begun portions of its modification,
repair or replacement work. The following stages are expected to be completed as
follows: modification, repair or replacement -- August 1999; and testing --
September 1999. As an additional part of its implementation plan to address the
Year 2000 problem, the Company has also initiated
12
<PAGE>
communications with third parties with which it has material relationships to
determine the extent of potential Year 2000 problems with these parties'
services provided to the Company.
The most critical of these services involve such items as reservations
systems for the Company's hotels. Without such systems, the Company could suffer
a material decline in business at many of its properties. The Company expects to
complete its communications and assessment of third parties' services in May
1999. Also, the Company expects to develop contingency plans in 1999 to allow
for manual or other alternative operation of certain computerized systems, in
the event that modification, repair, and replacement efforts are not completed
timely.
The Company anticipates completing its Year 2000 implementation plan no
later than September 30, 1999, which is prior to any anticipated impact on its
operating systems. As of March 31, 1999, historical costs incurred to address
the Year 2000 problem approximate $0.2 million. The Company expects that
essentially all of the future expenditures required to modify, repair, and
replace computerized systems at its leased and managed hotel properties will be
the financial responsibility of the owners of those properties. The Company has
not yet developed a final cost estimate related to fixing Year 2000 issues, but
an initial estimate of these remediation costs for all of its leased and managed
properties (including those properties leased from the REIT) is $15-20 million.
This cost estimate is based on the Company's preliminary assessment, and will be
refined and adjusted as the Company continues to complete the stages of its
implementation plan to address the potential Year 2000 problems.
Based on its preliminary assessment, the Company believes that its risks of
Year 2000 non-compliance (that is, its "most reasonably likely worst case
scenario"), with modifications to existing software and converting to new
software, will not pose significant operational problems for the Company's
computer systems as so modified and converted. If, however, such modifications
and conversions are not completed timely, the Year 2000 problem could have a
material impact on the Company's financial position and operations. The
Company's operations are highly dependent upon efficient operating systems at
its properties. To the extent that the Year 2000 problems materially affect the
conduct of operations at those properties, it is likely that the Company's
ability to efficiently manage operations would be materially affected. Also, as
discussed above, the vast majority of expenditures related to Year 2000 problems
at the Company's leased and managed properties will be the financial
responsibility of the owners of those properties. To the extent that those
owners are unable or unwilling to modify, repair, and replace systems with
potential Year 2000 problems, the Company could suffer material adverse
financial consequences.
13
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
Forward-Looking Statements
Certain statements in this Form 10-Q and in the future filings by the Company
with the SEC, in the Company's press releases, and in oral statements made by or
with the approval of an authorized executive officer constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors, which may cause the actual results, performance or
achievements of the Company to be materially different from any future results,
performance or achievement expressed or implied by such forward-looking
statements. Such factors include: the ability of the Company to successfully
implement its operating strategy; the Company's ability to manage expansion;
lease rental rates; changes in economic cycles; competition from other
hospitality companies; the ability of the REIT to acquire properties which will
be leased to the Company; the availability of financing to the Company and to
the REIT; changes in the laws and governmental regulations applicable to the
relationship between the REIT and the Company; and special risks associated with
the Merger (including the integration of CapStar with AGH and changes in the
laws and governmental regulations applicable to the structure of the Merger and
the related transactions).
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
4.5 Form of Stock Purchase Agreement dated as of March 31, 1999
4.6 Amendment to Stock Purchase Agreement dated April 15, 1999
4.7 Form of Registration Rights Agreement dated as of March 31, 1999
10.12 Form of Agreement of Limited Partnership of MIP Lessee, LP dated as of
March 31, 1999
27 -- Financial Data Schedule
(b) Reports on Form 8-K
Current Report on Form 8-K dated August 3, 1998 and filed on August 14, 1998,
regarding the spin-off of MeriStar Hotels & Resorts, Inc. and the acquisitions
of American General Hospitality, Inc. and AGH Leasing, L.P.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MeriStar Hotels & Resorts, Inc.
Dated: May 7, 1999 /s/ James A. Calder
--------------------------
James A. Calder
Chief Financial Officer
15
<PAGE>
Exhibit 4.5
STOCK PURCHASE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of March
__, 1999, by and between MeriStar Hotels & Resorts, Inc., a Delaware corporation
(the "Company"), on the one hand, and Oak Hill Capital Partners, L.P., a
-------
Delaware limited partnership, and Oak Hill Capital Management Partners, L.P., a
Delaware limited partnership (each, a "Purchaser" and, collectively, the
---------
"Purchasers"), on the other hand.
----------
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Company is the general partner of, and majority interest
holder in, MeriStar H&R Operating Company, L.P., a Delaware limited partnership
("Opco LP");
-------
WHEREAS, Opco LP, the Purchasers and others have entered into the
Agreement of Limited Partnership of MIP Lessee, LP, dated the date hereof (the
"JV Agreement"), with respect to the formation of a limited partnership (the
------------
"Joint Venture") for the purposes set forth in the JV Agreement;
-------------
WHEREAS, pursuant to the JV Agreement, Opco LP and its wholly-owned
subsidiary MIP GP, LLC ("MIP") have committed to make capital contributions to
the Joint Venture of up to $10 million in the aggregate, subject to certain
conditions as set forth in the JV Agreement;
WHEREAS, the Company, as general partner of Opco LP, intends to make
capital contributions to Opco LP of up to $10 million to fund the capital
contributions of Opco LP and MIP to the Joint Venture; and
WHEREAS, the Company wishes to sell shares of its Common Stock to
raise up to $10 million to fund or refund its contribution to Opco LP; and the
Purchasers wish to purchase such shares of Common Stock, upon the terms and
subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
<PAGE>
3
DEFINITIONS
-----------
1.1 Definitions. As used in this Agreement, and unless the context
-----------
requires a different meaning, the following terms shall have the meanings set
forth below:
"Agreement" means this Agreement as the same may be amended,
---------
supplemented or modified in accordance with the terms hereof.
"Business Day" means any day other than Saturday, Sunday or other day
------------
on which commercial banks in the State of New York are authorized or required by
law or executive order to close.
"By-Laws" means the by-laws of the Company, as the same may have been
-------
amended.
"Certificate of Incorporation" means the Certificate of Incorporation
----------------------------
of the Company, as the same may have been amended and in effect as of the
Closing Date.
"Commission" means the Securities and Exchange Commission or any
----------
similar agency then having jurisdiction to enforce the Securities Act.
"Committed Amount" has the meaning assigned to such term in Section
----------------
2.3.
"Common Stock" means the common stock, par value $.01 per share, of
------------
the Company, or any other capital stock of the Company into which such stock is
reclassified or reconstituted.
"Contractual Obligations" means as to any Person, any agreement,
-----------------------
undertaking, contract, indenture, mortgage, deed of trust or other instrument to
which such Person is a party or by which it or any of its property is bound.
"Consultation Period" has the meaning assigned to such term in Section
-------------------
5.1.
"Exercise Notice" has the meaning assigned to such term in Section
---------------
2.3.
"Governmental Authority" means the government of any nation, state,
----------------------
city, locality or other political subdivision of any thereof, or any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to
<PAGE>
4
government.
"Initial Closing" has the meaning assigned to such term in Section
---------------
2.2.
"Initial Closing Date" has the meaning assigned to such term in
--------------------
Section 2.2.
"Initial Shares" has the meaning assigned to such term in Section 2.1.
--------------
"JV Agreement" has the meaning assigned to such term in the Recitals.
------------
"Joint Venture" has the meaning assigned to such term in the Recitals.
-------------
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
----
assignment, encumbrance, lien (statutory or other) or other security interest of
any kind or nature whatsoever.
"MIP" has the meaning assigned to such term in the Recitals.
---
"Opco LP" has the meaning assigned to such term in the Recitals.
-------
"Option" has the meaning assigned to such term in Section 2.3.
------
"Option Closing" has the meaning assigned to such term in Section 2.4.
--------------
"Option Notice" has the meaning assigned to such term in Section 2.3.
-------------
"Option Shares" has the meaning assigned to such term in Section 2.3.
-------------
"Person" means any individual, firm, corporation, partnership, limited
------
liability company, trust, incorporated or unincorporated association, joint
venture, joint stock company, Governmental Authority or other entity of any
kind.
"Purchaser" and "Purchasers" have the meaning assigned to such terms
--------- ----------
in the Recitals.
"Requirements of Law" means as to any Person, the Certificate of
-------------------
Incorporation and By-Laws or other organizational or governing documents of such
Person, and any law, treaty, rule, regulation, right, privilege, qualification,
license or
<PAGE>
5
franchise or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable or binding upon such Person or any of its
property or to which such Person or any of its property is subject or pertaining
to any or all of the transactions contemplated or referred to herein.
"Securities Act" means the Securities Act of 1933, as amended, and the
--------------
rules and regulations of the Commission thereunder.
"Shares" has the meaning assigned to such term in Section 2.3.
------
"Trading Day" means any day on which the New York Stock Exchange is
-----------
open for trading.
"Transfer" means any sale, assignment, transfer or other disposition
--------
of any Shares or any reduction by either Purchaser of its risk relative to any
Shares.
ARTICLE 2
PURCHASE AND SALE OF SHARES
---------------------------
2.1 Purchase and Sale of Initial Shares. Subject to the terms herein
-----------------------------------
set forth, the Company agrees to sell to the Purchasers, and the Purchasers
agree that they will purchase from the Company, on the Initial Closing Date,
1,818,182 shares (the "Initial Shares") of Common Stock, for a purchase price of
--------------
$2.75 per share, and an aggregate purchase price of $5,000,000.
2.2 Initial Closing. The purchase and issuance of the Initial Shares
---------------
will take place at the closing (the "Initial Closing") to be held at the offices
---------------
of Paul, Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of the Americas, New
York, New York 10019, on April 15, 1999 (the "Initial Closing Date"). At the
--------------------
Initial Closing, the Company will deliver to the Purchasers certificates
representing the Initial Shares and the Purchasers will deliver to the Company
the aggregate purchase price therefor ($5,000,000) by wire transfer of
immediately available funds to an account designated by the Company. The number
of Initial Shares to be purchased by each Purchaser shall be determined by the
Purchasers, and notice of such determination shall be given to the Company,
prior to the Initial Closing.
2.3 Purchase and Sale of Option Shares.
----------------------------------
<PAGE>
6
(a) The Purchasers shall, under the conditions provided below in
this Section 2.3, and only under such conditions, have the option (the "Option")
------
to purchase additional shares of Common Stock (the "Option Shares" and, together
-------------
with the Initial Shares, the "Shares") in an aggregate amount having a value of
------
$5,000,000 at a purchase price per share equal to the greater of (i) the average
closing sale price of the Common Stock on the New York Stock Exchange for the 20
Trading Days ending on the Trading Day prior to the Option Closing Date or (ii)
$2.75. The Option shall be exercised as hereinafter provided in Section 2.3(c)
and may be exercised in whole only and not in part.
(b) If MIP wishes to cause the Underlying Partnership (as
defined in the JV Agreement) to enter into a contract to acquire a Hotel
Interest (as defined in the JV Agreement) and the entering into of such contract
would cause the Committed Amount to exceed $200,000,0000, the Option shall
become effective and the Company shall give a notice (the "Option Notice") to
-------------
the Purchasers requiring that the Purchasers make a determination as to whether
or not to exercise the Option. The Option Notice shall state the total Committed
Amount (assuming that the contract in question is entered into). The term
"Committed Amount" shall mean the sum of (i) the aggregate capital contributions
----------------
theretofore made to the Underlying Partnership, (ii) the aggregate borrowings
theretofore made by the Underlying Partnership, (iii) the aggregate amounts
remaining to be paid under outstanding contractual commitments of the Underlying
Partnership (to the extent not anticipated to be funded out of amounts described
in clauses (i) and (ii)) and (iv) the aggregate projected amounts of other
expenditures anticipated to be made by the Underlying Partnership (to the extent
not anticipated to be funded out of amounts described in clauses (i) and (ii)).
(c) The Purchasers may exercise the Option by giving notice (the
"Exercise Notice") of such exercise to the Company within five Business Days
---------------
after the date the Option Notice is given. In the Exercise Notice, the
Purchasers will agree to purchase from the Company, on the Option Closing Date,
the Option Shares for the aggregate purchase price of $5,000,000. The Exercise
Notice shall also set forth the number of Option Shares to be purchased by each
Purchaser. If no Exercise Notice is timely given by the Purchasers, the
Purchasers will be deemed to have elected not to exercise the Option and the
Option shall lapse.
2.4 Option Closing. The purchase and issuance of Option Shares will
--------------
take place at the closing (the "Option Closing") to be held at the offices of
--------------
Paul, Weiss, Rifkind, Wharton & Garrison on a date designated in the Exercise
Notice, which date
<PAGE>
7
shall be not less than five nor more than ten days after the date the Exercise
Notice is given. At the Option Closing, the Company will deliver to the
Purchasers certificates representing the Option Shares and the Purchasers will
deliver to the Company the aggregate purchase price ($5,000,000) by wire
transfer of immediately available funds to an account designated by the Company.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company hereby represents and warrants to the Purchasers as
follows:
3.1 Corporate Existence and Power. The Company (a) is a corporation
-----------------------------
duly organized, validly existing and in good standing under the laws of the
State of Delaware; (b) has all requisite corporate power and authority to own
and operate its property, to lease the property it operates, or will operate, as
lessee and to conduct the business in which it is currently, or is currently
proposed to be, engaged, including the business of the Joint Venture; (c) is
duly qualified as a foreign corporation, licensed and in good standing under the
laws of each jurisdiction where its ownership, lease or operation of property or
the conduct of its business requires such qualification, except to the extent
that the failure to be so qualified would not have a material adverse effect on
the business or financial condition of the Company; and (d) has the corporate
power and authority to execute, deliver and perform its obligations under this
Agreement.
3.2 Corporate Authorization; No Contravention. The execution,
-----------------------------------------
delivery and performance by the Company of this Agreement and the transactions
contemplated hereby, including, without limitation, the sale, issuance and
delivery of the Shares, (a) have been duly authorized by all necessary corporate
action of the Company; (b) do not contravene the terms of the Certificate of
Incorporation or By-Laws; and (c) do not violate, conflict with or result in any
breach or contravention of or the creation of any Lien under, any Contractual
Obligation of the Company, or any Requirement of Law applicable to the Company.
3.3 Litigation. There are no legal actions, suits, proceedings,
----------
claims, complaints, disputes or investigations pending, or to the knowledge of
the Company, threatened, at law, in equity, in arbitration or before any
Governmental Authority against the Company that would, if adversely determined,
have a material adverse effect on the ability of the Company to perform its
obligations under this Agreement.
<PAGE>
8
To the knowledge of the Company, there is no injunction, writ, temporary
restraining order, decree or order of any nature has been issued by any court or
other Governmental Authority against the Company purporting to enjoin or
restrain the execution, delivery or performance of this Agreement.
3.4 Governmental Authorization; Third Party Consents. No approval,
------------------------------------------------
consent, compliance, exemption, authorization, or other action by, or notice to,
or filing with, any Governmental Authority or any other Person in respect of any
Requirement of Law, and no lapse of a waiting period under a Requirement of Law,
is necessary or required in connection with the execution, delivery or
performance (including, without limitation, the sale, issuance and delivery of
the Shares) by the Company, or enforcement against the Company, of this
Agreement or the transactions contemplated hereby.
3.5 Binding Effect. This Agreement has been duly executed and
--------------
delivered by the Company and constitutes the legal, valid and binding obligation
of the Company enforceable against the Company in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency or
other similar laws affecting the enforcement of creditors' rights generally and
by general principles of equity relating to enforceability.
3.6 Private Offering. No form of general solicitation or general
----------------
advertising was used by the Company or its representatives in connection with
the offer or sale of the Shares. No registration of the Shares pursuant to the
provisions of the Securities Act or any state securities or "blue sky" laws will
be required by the offer, sale, or issuance of the Shares pursuant to this
Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
------------------------------------------------
Each Purchaser hereby represents and warrants to the Company as
follows:
4.1 Existence and Power. Such Purchaser (a) is duly organized and
-------------------
validly existing under the laws of the jurisdiction of its formation and (b) has
the requisite power and authority to execute, deliver and perform its
obligations under this Agreement.
<PAGE>
9
4.2 Authorization; No Contravention. The execution, delivery and
-------------------------------
performance by such Purchaser of this Agreement and the transactions
contemplated hereby, including, without limitation, the purchase of the Shares,
(a) have been duly authorized by all necessary action, (b) do not contravene the
terms of such Purchaser's organizational documents, or any amendment thereof,
and (c) do not violate, conflict with or result in any breach or contravention
of or the creation of any Lien under, any Contractual Obligation of such
Purchaser, or any Requirement of Law applicable to such Purchaser.
4.3 Binding Effect. This Agreement has been duly executed and
--------------
delivered by such Purchaser and constitutes the legal, valid and binding
obligation of such Purchaser, enforceable against it in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance or transfer, moratorium or
similar laws affecting the enforcement of creditors' rights generally or by
equitable principles relating to enforceability.
4.4 Purchase for Own Account. The Shares to be acquired by such
------------------------
Purchaser pursuant to this Agreement are being acquired for its own account and
with no intention of distributing or reselling the Shares or any part thereof in
any transaction that would be in violation of the securities laws of the United
States of America, or any state, without prejudice, however, to the rights of
such Purchaser at all times to sell or otherwise dispose of all or any part of
the Shares under an effective registration statement under the Securities Act,
or under an exemption from such registration available under the Securities Act,
and subject, nevertheless, to the disposition of such Purchaser's property being
at all times within its control. If either Purchaser should in the future
decide to dispose of any part of the Shares, such Purchaser understands and
agrees that it may do so only in compliance with the Securities Act and
applicable state securities laws, as then in effect. Each Purchaser agrees to
the imprinting, so long as required by law, of a legend on certificates
representing all of the Shares to the following effect: THE SHARES REPRESENTED
BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED FOR SALE,
SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH
LAWS.
<PAGE>
10
ARTICLE 5
MANAGEMENT RIGHTS
-----------------
5.1 Board of Directors Observer. During the period from the date
---------------------------
hereof through and including the date on which the Purchasers no longer own
collectively at least 50% of the Shares (the "Consultation Period"), the
-------------------
Purchasers shall be able to appoint a representative to attend meetings of the
Board of Directors of the Company, to change the representative so appointed at
any time and, upon the resignation of such representative for any reason, to
reappoint such a representative. In addition, the Company shall provide the
Purchasers with a copy of any materials to be distributed or discussed at such
meetings at the same time as provided to members of the Board of Directors.
5.2 Proposals and Recommendations. During the Consultation Period,
-----------------------------
the Purchasers shall be entitled to make proposals, recommendations and
suggestions to the Company's officers and directors relating to the business and
affairs of the Company.
5.3 Consultation with Company Management. During the Consultation
------------------------------------
Period, the Company shall permit the Purchasers at all reasonable times and at
the Purchasers' expense, to discuss the Company's business and affairs with its
officers, directors and independent accountants.
5.4 Examination of Books. During the Consultation Period, the
--------------------
Company shall permit the Purchasers, at all reasonable times and at the
Purchasers' expense, to examine such books, records, documents and other written
information in the possession of the Company relating to its affairs as the
Purchasers may reasonably request.
5.5 Inspection of Properties. During the Consultation Period, the
------------------------
Company shall permit the Purchasers, at all reasonable times and at the
Purchasers' expense, to visit and inspect the Company's properties.
5.6 Directorship. Anything in this Article 5 to the contrary
------------
notwithstanding, the rights granted to the Purchasers under this Article 5 shall
be suspended during any period of time during which a representative of the
Purchasers serves as a member of the Company's Board of Directors. A director
of the Company
<PAGE>
11
shall be deemed to be a representative of the Purchasers only if such director
is designated as such representative by the Purchasers and such designation is
accepted in writing by the Company. The Purchasers may revoke any such
designation, and the Company may revoke any such acceptance, at any time. The
Purchasers hereby designate Daniel L. Doctoroff as its representative for
purposes of this Section 5.6 and the Company hereby accepts such designation.
ARTICLE 6
SALE OF SHARES
--------------
6.1 Restricted Period. During the period beginning on the Initial
-----------------
Closing Date and ending on the earlier to occur of (i) the six month anniversary
of the Initial Closing Date or (ii) the sale or other disposition by the
Underlying Partnership (as defined in the JV Agreement) and its subsidiaries of
all Hotel Interests (as defined in the JV Agreement), the Purchasers shall not
Transfer any of the Shares without the prior written consent of the Company.
ARTICLE 7
MISCELLANEOUS
-------------
7.1 Notices. All notices or other communication required or
-------
permitted hereunder shall be in writing and shall be delivered personally,
telecopied or sent by certified, registered or express mail, postage prepaid.
Any such notice shall be deemed given when so delivered personally, telecopied
or sent by certified, registered or express mail, as follows:
(a) if to the Company:
MeriStar Hotels & Resorts, Inc.
1010 Wisconsin Avenue
Washington, D.C. 20007
Attention: John Emery
Telecopy: (202) 295-2230
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
<PAGE>
12
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Richard S. Borisoff, Esq.
Telecopy: (212) 757-3990
(c) if to the Purchasers:
Oak Hill Partners, Inc.
Park Avenue Tower
65 East 55th Street
New York, New York 10022
Attention: Bradford E. Bernstein
Telecopy: (212) 838-8411
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, NY 10012
Attention: Brad R. Okun, Esq.
Telecopy: (212) 408-2420
Any party may by notice given in accordance with this Section 7.1 designate
another address or person for receipt of notices hereunder.
7.2 Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors and permitted assigns of the
parties hereto. No Person other than the parties hereto and their successors and
permitted assigns is intended to be a beneficiary of this Agreement. No party
hereto may assign its rights under this Agreement without the prior written
consent of the other party hereto.
7.3 Amendment and Waiver.
--------------------
(a) No failure or delay on the part of the Company or the
Purchasers in exercising any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right,
<PAGE>
13
power or remedy. The remedies provided for herein are cumulative and are not
exclusive of any remedies that may be available to the Company or the Purchasers
at law, in equity or otherwise.
(b) Any amendment, supplement or modification of or to any
provision of this Agreement and any waiver of any provision of this Agreement
shall be effective only if it is made or given in writing and signed by the
Company and each Purchaser.
7.4 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, all of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
7.5 Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
7.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
CONFLICTS OF LAW PRINCIPLES THEREOF.
7.7 Severability. If any one or more of the provisions contained
------------
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, unless the provisions held
invalid, illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof.
7.8 Entire Agreement. This Agreement is intended by the parties as a
----------------
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein.
This Agreement supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
7.9 Further Assurances. Each of the parties shall execute such
------------------
documents and perform such further acts (including, without limitation,
obtaining any
<PAGE>
14
consents, exemptions, authorizations, or other actions by, or giving any notices
to, or making any filings with, any Governmental Authority or any other Person)
as may be reasonably required or desirable to carry out or to perform the
provisions of this Agreement.
<PAGE>
15
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement as of the date first stated above.
MERISTAR HOTELS & RESORTS, INC.
By:_________________________________
Name:
Title:
OAK HILL CAPITAL PARTNERS, L.P.
By: OHCP GENPAR, L.P., its general partner
By: OHCP MGP, LLC, its general partner
By:_________________________________
Name:
Title:
OAK HILL CAPITAL MANAGEMENT PARTNERS, L.P.
By: OHCP GENPAR, L.P., its general partner
By: OHCP MGP, LLC, its general partner
By:_________________________________
Name:
Title:
<PAGE>
Exhibit 4.6
AMENDMENT TO STOCK PURCHASE AGREEMENT
-------------------------------------
In accordance with Section 7.3 (relating to certain permitted
amendments) of that certain Stock Purchase Agreement dated as of March 31, 1999
by and between the undersigned (the "Agreement"), Article 5 of such Agreement is
hereby amended, without further action of the parties, to clarify that all of
the management rights conferred upon the "Purchasers" in that Article shall be
understood to have been conferred, ab initio, solely on Oak Hill Capital
Partners, L.P. (which is one of the "Purchasers" under that Agreement);
provided, that the determination of the "Consultation Period" pursuant to the
first sentence of Section 5.1 of the Agreement shall continue to be made with
reference to the "Shares" collectively owned by all of the "Purchasers."
Oak Hill Capital Partners, L.P. hereby ratifies, confirms and approves
Daniel L. Doctoroff as its representative for purposes of Section 5.6 of the
Agreement, as provided in the last sentence of Section 5.6, and the Company
hereby accepts such designation.
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement on the 15th day of April, 1999, effective as of the 31st day of March,
1999.
MERISTAR HOTELS & RESORTS, INC.
By:_________________________________
Name:
Title:
OAK HILL CAPITAL PARTNERS, L.P.
By: OHCP GenPar, L.P., its general partner
By: OHCP MGP, LLC, its general partner
By:_________________________________
Name: Daniel L. Doctoroff
Title: Vice President
OAK HILL CAPITAL MANAGEMENT PARTNERS, L.P.
By: OHCP GenPar, L.P., its general partner
By: OHCP MGP, LLC, its general partner
<PAGE>
By:_________________________________
Name: Daniel L. Doctoroff
Title: Vice President
<PAGE>
Exhibit 4.7
REGISTRATION RIGHTS AGREEMENT
dated as of March 31, 1999
among
MERISTAR HOTELS & RESORTS, INC.
and
The Other Parties Listed on the Signature Pages Hereto
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
<S> <C>
1. Definitions 1
2. Shelf Registration 2
(a) Shelf Registration Statement 2
(b) Provision by Holders of Certain Information in
Connection with the Shelf Registration Statement 3
3. Registration Procedures 3
4. Registration Expenses 8
5. Indemnification 9
(a) Indemnification by the Company 9
(b) Indemnification by the Holders 10
(c) Conduct of Indemnification Proceedings 10
(d) Contribution 11
6. Rule 144 12
7. Underwritten Registrations 12
8. Miscellaneous 12
(a) Remedies 12
(b) No Inconsistent Agreements 13
(c) Amendments and Waivers 13
(d) Notices 13
(e) Owner of Registrable Securities 13
(f) Successors and Assigns 13
(g) Counterparts 14
(h) Headings 14
(i) Governing Law 14
(j) Severability 14
(k) Entire Agreement 14
(l) Attorneys' Fees 14
</TABLE>
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), is made and
entered into as of March __, 1999, by and among MeriStar Hotels & Resorts, Inc.,
a Delaware corporation (the "Company"), and the other parties signatory hereto
(each a "Holder" and, collectively, the "Holders").
RECITALS
--------
WHEREAS, the Holders have entered into, or are equity owners in
entities that have entered into, agreements which contemplate, among other
things, the execution and delivery of this Agreement by the Company and the
Holders.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
1. Definitions: For purposes of this Agreement, the following terms
-----------
have the following meanings when used herein with initial capital letters:
"Advice" shall have the meaning set forth in Section 3 hereof.
------
"Commission" shall mean the Securities and Exchange Commission.
----------
"Common Stock" shall mean the Common Stock, par value $0.01 per share,
------------
of the Company.
"Holder" or "Holders" shall have the meaning set forth in the
------ -------
Preamble.
"Losses" shall have the meaning set forth in Section 5 hereof.
------
"Operating Partnership" shall mean MeriStar H & R Operating Company,
---------------------
L.P., a Delaware limited partnership.
"Prospectus" shall mean the prospectus included in the Shelf
----------
Registration Statement (including without limitation a prospectus that discloses
information previously omitted from a prospectus filed as part of the effective
Shelf Registration Statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Shelf Registration Statement and all other amendments
and supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
<PAGE>
"Registrable Securities" shall mean each of the Shares, until, in the
----------------------
case of any such Share, (i) it is effectively registered under the Securities
Act and disposed of in accordance with the Shelf Registration Statement covering
it, (ii) it is saleable by the holder thereof pursuant to Rule 144(k), or (iii)
it is distributed to the public by the holder thereof pursuant to Rule 144.
"Registration Expenses" shall have the meaning set forth in Section 4
---------------------
hereof.
"Rule 144" shall mean Rule 144 promulgated by the Commission under the
--------
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
--------------
"Shares" shall mean all shares of Common Stock issued or to be issued
------
to any Holder pursuant to the Stock Purchase Agreement, dated as of the date
hereof, among the Company and the other parties identified on the signature
pages thereof.
"Shelf Registration Statement" shall have the meaning set forth in
----------------------------
Section 2(a) hereof, and shall include the related Prospectus, all amendments
and supplements thereto (including post-effective amendments), all exhibits and
all material incorporated by reference or deemed to be incorporated by reference
therein.
"Special Counsel" shall have the meaning set forth in Section 4(b)
---------------
hereof.
"Underwritten registration or underwritten offering" shall mean a sale
--------------------------------------------------
of securities of the Company to an underwriter for reoffering to the public
pursuant to the Shelf Registration Statement filed by the Company with the
Commission under the Securities Act.
2. Shelf Registration.
------------------
(a) Shelf Registration Statement. The Company hereby agrees to
----------------------------
cause to be filed a shelf registration statement pursuant to Rule 415 under the
Securities Act (the "Shelf Registration Statement"), which Shelf Registration
Statement shall permit sales of all of the Registrable Securities held by those
Holders which shall have provided the information required pursuant to Section
2(b) hereof, and to cause such Shelf Registration Statement to be declared
effective by the Commission on or before the date which is six (6) months after
the date of this Agreement. The Company shall use its best efforts to keep such
Shelf Registration Statement continuously
<PAGE>
effective, supplemented and amended until the earlier of (i) the date when all
of the Registrable Securities covered thereby are issued or disposed of or (ii)
the date on which Holders may sell Registrable Securities without registration
under the Securities Act, pursuant to Rule 144(k) thereunder or any similar rule
that may be adopted by the Commission.
(b) Provision by Holders of Certain Information in Connection
---------------------------------------------------------
with the Shelf Registration Statement. No Holder of Registrable Securities may
- -------------------------------------
include any of its Registrable Securities in any Shelf Registration Statement
pursuant to this Agreement unless and until such Holder furnishes to the Company
in writing, within 20 business days after receipt of a request therefor, such
information as the Company may reasonably request for use in connection with the
Shelf Registration Statement or Prospectus or preliminary Prospectus included
therein. Each Holder as to which the Shelf Registration Statement is being
effected agrees to furnish promptly to the Company all information required to
be disclosed in order to make the information previously furnished to the
Company by such Holder not materially misleading.
3. Registration Procedures. In connection with the Company's
-----------------------
registration obligations pursuant to Section 2 hereof, the Company will effect
such registration to permit the sale of such Registrable Securities in
accordance with the intended method or methods of disposition thereof, and
pursuant thereto the Company will as expeditiously as possible, in each case, to
the extent applicable:
(a) Prepare and file with the Commission at least sixty (60)
days prior to the date which is six (6) months after the date hereof, the Shelf
Registration Statement on any appropriate form under the Securities Act
available for the sale of the Registrable Securities by the Holders in
accordance with the intended method or methods of distribution thereof, and
cause such Shelf Registration Statement to become effective and remain effective
as provided herein; provided, however, that before filing the Shelf Registration
-------- -------
Statement or Prospectus or any amendments or supplements thereto (including
documents that would be incorporated or deemed to be incorporated therein by
reference) the Company will furnish to the Holders whose Registrable Securities
are covered by such Shelf Registration Statement, the Special Counsel and the
managing underwriters, if any, copies of all such documents proposed to be
filed, which documents will be subject to review of such Holders, the Special
Counsel and such underwriters, and the Company will not file the Shelf
Registration Statement or amendment thereto or any Prospectus or any supplement
thereto (including such documents which, upon filing, would or would be
incorporated or deemed to be incorporated by reference therein) to which the
Holders of a majority of the Registrable Securities covered by the Shelf
Registration Statement, the Special Counsel or the managing underwriter, if any,
shall reasonably object on a timely basis.
(b) Prepare and file with the Commission such amendments
<PAGE>
and post-effective amendments to the Shelf Registration Statement as may be
necessary to keep such Shelf Registration Statement continuously effective for
the applicable period specified in Section 2(a); cause the related Prospectus to
be supplemented by any required Prospectus supplement, and as so supplemented to
be filed pursuant to Rule 424 (or any similar provision then in force) under the
Securities Act; and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by the Shelf Registration
Statement during the applicable period in accordance with the intended methods
of disposition by the sellers thereof set forth in the Shelf Registration
Statement as so amended or to such Prospectus as so supplemented.
(c) Notify the selling Holders, the Special Counsel and the
managing underwriters, if any, promptly, and (if requested by any such person)
confirm such notice in writing, (i) when a Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with respect to the
Shelf Registration Statement or any post-effective amendment, when the same has
become effective, (ii) of any request by the Commission or any other federal or
state governmental authority for amendments or supplements to the Shelf
Registration Statement or related Prospectus or for additional information,
(iii) of the issuance by the Commission or any other federal or state
governmental authority of any stop order suspending the effectiveness of the
Shelf Registration Statement or the initiation of any proceedings for that
purpose, (iv) if at any time the representations and warranties of the Company
contained in any agreement contemplated by Section 3(m) hereof (including any
underwriting agreement) cease to be true and correct, (v) of the receipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Registrable Securities for sale in
any jurisdiction or the initiation or threatening of any proceeding for such
purpose, (vi) of the occurrence of any event which makes any statement made in
the Shelf Registration Statement or related Prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in any
material respect or which requires the making of any changes in the Shelf
Registration Statement, Prospectus or documents so that, in the case of the
Shelf Registration Statement, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading and, in the case of
the Prospectus, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated or is necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, and (vii) of the Company's reasonable determination that a
post-effective amendment to the Shelf Registration Statement would be
appropriate.
(d) Use every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of the Shelf Registration Statement, or the
lifting of any suspension of the qualification (or exemption from qualification)
of any of the Registrable Securities for sale in any jurisdiction, at the
earliest possible moment.
(e) If requested by the managing underwriters, if any, or the
Holders of a majority of the Registrable Securities being registered, (i)
promptly incorporate in a Prospectus supplement or post-effective amendment such
information as the managing underwriters, if any, and such Holder agree should
be included therein as may be required by applicable law and (ii) make all
required filings of such Prospectus supplement or such post-effective amendment
as soon as practicable after the Company has received notification of the
matters to be incorporated in such
<PAGE>
Prospectus supplement or post-effective amendment; provided, however, that the
-------- -------
Company will not be required to take any actions under this Section 3(e) that
are not, in the opinion of counsel for the Company, in compliance with
applicable law.
(f) Furnish to each selling Holder, the Special Counsel and each
managing underwriter, if any, without charge, at least one conformed copy of the
Shelf Registration Statement and any post-effective amendment thereto, including
financial statements (but excluding schedules, all documents incorporated or
deemed incorporated therein by reference and all exhibits, unless requested in
writing by such selling Holder, counsel or underwriter).
(g) Deliver to each selling Holder, the Special Counsel and the
underwriters, if any, without charge, as many copies of the Prospectus or
Prospectuses relating to such Registrable Securities (including each preliminary
prospectus) and any amendment or supplement thereto as such persons may request;
and the Company hereby consents to the use of such Prospectus or each amendment
or supplement thereto by each of the selling Holders and the underwriters, if
any, in connection with the offering and sale of the Registrable Securities
covered by such Prospectus or any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities, to
register or qualify or cooperate with the selling Holders, the underwriters, if
any, and their respective counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or blue sky laws
of such jurisdictions within the United States as any seller or underwriter
reasonably requests in writing; use all reasonable efforts to keep each such
registration or qualification (or exemption therefrom) effective during the
period the Shelf Registration Statement is required to be kept effective and do
any and all other acts or things necessary or advisable to enable the
disposition in such jurisdiction of the Registrable Securities covered by the
Shelf Registration Statement; provided, however, that the Company will not be
-------- -------
required to (i) qualify generally to do business in any jurisdiction in which it
is not then so qualified or (ii) take any action that would subject it to
general service of process in any such jurisdiction in which it is not then so
subject.
(i) Cooperate with the selling Holders and the managing
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold and enable such
Registrable Securities to be in such denominations and registered in such names
as the managing underwriters, if any, shall request at least two business days
prior to any sale of Registrable Securities to the underwriters.
(j) Use all reasonable efforts to cause the Registrable
Securities covered by the Shelf Registration Statement to be registered with or
approved by such other governmental agencies or authorities within the United
States except as may be required solely as a consequence of the nature of such
selling Holder's business, in which case the Company will cooperate in all
reasonable respects with the filing of the Shelf Registration Statement and the
granting of such approvals as may be necessary to enable the seller or sellers
thereof or the underwriters, if any, to consummate the disposition of such
Registrable Securities.
<PAGE>
(k) Upon the occurrence of any event contemplated by Section
3(c)(vi) or 3(c)(vii) hereof, prepare a supplement or post-effective amendment
to the Shelf Registration Statement or a supplement to the related Prospectus or
any document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of the Registrable
Securities being sold thereunder, such Prospectus will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(l) Use all reasonable efforts to cause all Registrable
Securities covered by the Shelf Registration Statement to be listed on each
securities exchange, if any, on which similar securities issued by the Company
are then listed.
(m) Enter into such agreements (including, in the event of an
underwritten offering, an underwriting agreement in form, scope and substance as
is customary in underwritten offerings) and take all such other actions in
connection therewith (including those requested by the selling Holders and, in
the event of an underwritten offering, those requested by the managing
underwriters) in order to expedite or facilitate the disposition of such
Registrable Securities and in such connection, whether or not an underwriting
agreement is entered into and whether or not the registration is an underwritten
registration, (i) make such representations and warranties to the Holders and
the underwriters, if any, with respect to the business of the Company and its
subsidiaries, the Shelf Registration Statement, Prospectus and documents
incorporated by reference or deemed incorporated by reference, if any, in each
case, in form, substance and scope as are customarily made by issuers to
underwriters in underwritten offerings and confirm the same if and when
requested; (ii) obtain opinions of counsel to the Company and updates thereof
(which counsel and opinions (in form, scope and substance) shall be reasonably
satisfactory to the managing underwriters, if any, and the Holders of a majority
of the Registrable Securities being sold) addressed to such selling Holders and
each of the underwriters, if any, covering the matters customarily covered in
opinions requested in underwritten offerings and such other matters as may be
reasonably requested by such selling Holders and underwriters, including without
limitation the matters referred to in Section 3(m)(i) hereof; (iii) use its best
efforts to obtain "comfort" letters and updates thereof from the independent
certified public accountants of the Company (and, if necessary, any other
certified public accountants of any subsidiary of the Company or of any business
acquired by the Company for which financial statements and financial data is, or
is required to be, included in the Shelf Registration Statement), addressed to
the Company and each of the underwriters, if any, such letters to be in
customary form and covering matters of the type customarily covered in "comfort"
letters in connection with underwritten offerings; and (iv) deliver such
documents and certificates as may be requested by the Holders of a majority of
the Registrable Securities being sold, the Special Counsel and the managing
underwriters, if any, to evidence the continued validity of the representations
and warranties of the Company and its subsidiaries made pursuant to clause (i)
above and to evidence compliance with any customary conditions contained in the
underwriting agreement or similar agreement entered into by the Company. The
foregoing actions will be taken in connection with each closing under such
underwriting or similar agreement as and to the extent required thereunder.
<PAGE>
(n) Make available for inspection by a representative of the
selling Holders, any underwriter participating in any disposition of Registrable
Securities, and any attorney or accountant retained by such selling Holders or
underwriter, all financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries, and cause the officers,
directors and employees of the Company and its subsidiaries to supply all
information reasonably requested by any such representative, underwriter,
attorney or accountant in connection with the Shelf Registration Statement;
provided, however, that any records, information or documents that are
- -------- -------
designated by the Company in writing as confidential at the time of delivery of
such records, information or documents will be kept confidential by such persons
unless (i) such records, information or documents are or come to be in the
public domain or otherwise publicly available, (ii) disclosure of such records,
information or documents is required by court or administrative order or is
necessary to respond to inquiries of regulatory authorities, or (iii) disclosure
of such records, information or documents, in the opinion of counsel to such
person, is otherwise required by law (including, without limitation, pursuant to
the requirements of the Securities Act).
(o) Comply with all applicable rules and regulations of the
Commission and make generally available to its security holders earning
statements satisfying the provisions of Section 11(a) of the Securities Act and
Rule 158 thereunder (or any similar rule promulgated under the Securities Act)
no later than 45 calendar days after the end of any 12-month period (or 90
calendar days after the end of any 12-month period if such period is a fiscal
year) (i) commencing at the end of any fiscal quarter in which Registrable
Securities are sold to underwriters in a firm commitment or best efforts
underwritten offering, and (ii) if not sold to underwriters in such an offering,
commencing on the first day of the first fiscal quarter of the Company, after
the effective date of the Shelf Registration Statement, which statements shall
cover said 12-month period.
(p) In connection with any underwritten offering, cause
appropriate members of its management to cooperate and participate on a
reasonable basis in the underwriters' "road show" conferences related to such
offering.
The Company may require each selling Holder as to which any
registration is being effected to furnish to the Company such information
regarding the distribution of such Registrable Securities as the Company may,
from time to time, reasonably request in writing and the Company may exclude
from such registration the Registrable Securities of any selling Holder who
unreasonably fails to furnish such information within a reasonable time after
receiving such request.
Each Holder will be deemed to have agreed by virtue of its acquisition
of such Registrable Securities that, upon receipt of any notice from the Company
of the occurrence of any event of the kind described in Section 3(c)(ii),
3(c)(iii), 3(c)(v), 3(c)(vi) or 3(c)(vii) hereof, such Holder will forthwith
discontinue disposition of such Registrable Securities covered by the Shelf
Registration Statement or Prospectus until such Holder's receipt of the copies
of the supplemented or amended Prospectus contemplated by Section 3(k) hereof,
or until it is advised in writing (the "Advice") by the Company that the use of
the applicable Prospectus may be resumed, and has received copies of any
additional or supplemental filings that are incorporated or
<PAGE>
deemed to be incorporated by reference in such Prospectus. In the event the
Company shall give any such notice, the time period prescribed in Section 2(a)
hereof will be extended by the number of days during the time period from and
including the date of the giving of such notice to and including the date when
each seller of Registrable Securities covered by the Shelf Registration
Statement shall have received (x) the copies of the supplemented or amended
Prospectus contemplated by Section 3(k) hereof or (y) the Advice.
4. Registration Expenses.
---------------------
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company will be borne by the Company
whether or not the Shelf Registration Statement becomes effective. Such fees and
expenses will include, without limitation, (i) all registration and filing fees
(including without limitation fees and expenses (x) with respect to filings
required to be made with the National Association of Securities Dealers, Inc.
and (y) of compliance with securities or "blue sky" laws (including without
limitation fees and disbursements of counsel for the underwriters or Holders in
connection with "blue sky" qualifications of the Registrable Securities and
determination of the eligibility of the Registrable Securities for investment
under the laws of such jurisdictions as the managing underwriters, if any, or
Holders of a majority of the Registrable Securities being sold may designate)),
(ii) printing expenses (including without limitation expenses of printing
certificates for Registrable Securities in a form eligible for deposit with The
Depository Trust Company and of printing prospectuses if the printing of
prospectuses is requested by the Holders of a majority of the Registrable
Securities included in the Shelf Registration Statement), (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of counsel for the
Company and the Special Counsel for the selling Holders, (v) fees and
disbursements of all independent certified public accountants referred to in
Section 5(m)(iii) hereof (including the expenses of any special audit and
"comfort" letters required by or incident to such performance), (vi) any fees
and expenses of any "qualified independent underwriter" or other independent
appraiser participating in an offering pursuant to Section 3 of Schedule E to
the By-laws of the National Association of Securities Dealers, Inc., (vii)
Securities Act liability insurance if the Company so desires such insurance, and
(viii) fees and expenses of all other persons retained by the Company. In
addition, the Company will pay its internal expenses (including without
limitation all salaries and expenses of its officers and employees performing
legal or accounting duties), the expense of any annual audit, the fees and
expenses incurred in connection with the listing of the securities to be
registered on any securities exchange on which similar securities issued by the
Company are then listed and the fees and expenses of any person, including
special experts, retained by the Company. In no event, however, will the Company
be responsible for any underwriting discount or selling commission with respect
to any sale of Registrable Securities pursuant to this Agreement.
(b) In connection with any registration of Registrable
Securities hereunder, the Company will reimburse the Holders of the Registrable
Securities being registered in such registration for the reasonable fees and
disbursements of not more than one counsel (the "Special Counsel"), together
with appropriate local counsel, chosen by the Holders of a majority of the
Registrable Securities being registered.
<PAGE>
5. Indemnification.
---------------
(a) Indemnification by the Company. The Company will, without
------------------------------
limitation as to time, indemnify and hold harmless, to the fullest extent
permitted by law, each Holder of Registrable Securities registered pursuant to
this Agreement, the officers, directors, partners, managers, agents and
employees of each of them, each person who controls such Holder (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
and the officers, directors, partners, managers, agents and employees of any
such controlling person, from and against all losses, claims, damages,
liabilities, costs (including without limitation the costs of investigation and
attorneys' fees) and expenses (collectively, "Losses"), as incurred, arising out
of or based upon any untrue or alleged untrue statement of a material fact
contained in the Shelf Registration Statement, Prospectus or form of Prospectus
(including any document incorporated by reference into any such Shelf
Registration Statement, Prospectus or form of Prospectus) or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or based
upon any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
except insofar as the same are based solely upon information furnished in
writing to the Company by such Holder expressly for use therein; provided,
--------
however, that the Company will not be liable to any Holder to the extent that
- -------
any such Losses arise out of or are based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in any preliminary
prospectus if either (A) (i) such Holder failed to send or deliver a copy of the
Prospectus with or prior to the delivery of written confirmation of the sale by
such Holder to the person asserting the claim from which such Losses arise and
(ii) the Prospectus would have completely corrected such untrue statement or
alleged untrue statement or such omission or alleged omission; or (B) such
untrue statement or alleged untrue statement, omission or alleged omission is
completely corrected in an amendment or supplement to the Prospectus previously
furnished by or on behalf of the Company with copies of the Prospectus as so
amended or supplemented, and such Holder thereafter fails to deliver such
Prospectus as so amended or supplemented prior to or concurrently with the sale
of a Registrable Security to the person asserting the claim from which such
Losses arise.
(b) Indemnification by the Holders. In connection with the Shelf
------------------------------
Registration Statement in which a Holder is participating, such Holder will
furnish to the Company in writing such information as the Company reasonably
requests for use in connection with the Shelf Registration Statement or
Prospectus and will indemnify, to the fullest extent permitted by law, the
Company, its directors and officers, agents and employees, each person who
controls the Company (within the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act), and the directors, officers, agents or
employees of such controlling persons, from and against all Losses arising out
of or based upon any untrue statement of a material fact contained in the Shelf
Registration Statement, Prospectus or preliminary prospectus or arising out of
or based upon any omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, to the extent, but only
to the extent, that such untrue statement or omission is contained in any
information so furnished in writing by such Holder to the Company expressly for
use in the Shelf Registration Statement or Prospectus and was relied upon by the
Company in
<PAGE>
the preparation of the Shelf Registration Statement, Prospectus or preliminary
prospectus. In no event will the liability of any selling Holder hereunder be
greater in amount than the dollar amount of the proceeds (net of payment of all
expenses) received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any person shall
--------------------------------------
become entitled to indemnity hereunder (an "indemnified party"), such
indemnified party shall give prompt notice to the party from which such
indemnity is sought (the "indemnifying party") of any claim or of the
commencement of any action or proceeding with respect to which such indemnified
party seeks indemnification or contribution pursuant hereto; provided, however,
-------- -------
that the failure to so notify the indemnifying party will not relieve the
indemnifying party from any obligation or liability except to the extent that
the indemnifying party has been prejudiced materially by such failure. All fees
and expenses (including any fees and expenses incurred in connection with
investigating or preparing to defend such action or proceeding) will be paid to
the indemnified party, as incurred, within five calendar days of written notice
thereof to the indemnifying party (regardless of whether it is ultimately
determined that an indemnified party is not entitled to indemnification
hereunder). The indemnifying party will not consent to entry of any judgment or
enter into any settlement or otherwise seek to terminate any action or
proceeding in which any indemnified party is or could be a party and as to which
indemnification or contribution could be sought by such indemnified party under
this Section 5, unless such judgment, settlement or other termination includes
as an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release, in form and substance satisfactory to the
indemnified party, from all liability in respect of such claim or litigation for
which such indemnified party would be entitled to indemnification hereunder.
(d) Contribution. If the indemnification provided for in this
------------
Section 5 is unavailable to an indemnified party under Section 5(a) or 5(b)
hereof in respect of any Losses or is insufficient to hold such indemnified
party harmless, then each applicable indemnifying party, in lieu of indemnifying
such indemnified party, will, jointly and severally, contribute to the amount
paid or payable by such indemnified party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party or indemnifying parties, on the one hand, and such indemnified party, on
the other hand, in connection with the actions, statement or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such indemnifying party or indemnifying parties, on the
one hand, and such indemnified party, on the other hand, will be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission of a material fact, has been taken or made by, or related to the
information supplied by, such indemnifying party or indemnified party, and the
parties'
<PAGE>
relative intent, knowledge, access to information and opportunity to correct or
prevent such action, statement or omission. The amount paid or payable by a
party as a result of any Losses will be deemed to include any legal or other
fees or expenses incurred by such party in connection with any action or
proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
--- ----
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provision of this Section 5(d), an indemnifying party that
is a selling Holder will not be required to contribute any amount in excess of
the amount by which the total price at which the Registrable Securities sold by
such indemnifying party and distributed to the public were offered to the public
exceed the amount of any damages which such indemnifying party has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) will be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
The indemnity, contribution and expense reimbursement obligations of
the Company hereunder will be in addition to any liability the Company may
otherwise have hereunder or otherwise. The provisions of this Section 5 will
survive so long as Registrable Securities remain outstanding, notwithstanding
any transfer of the Registrable Securities by any Holder thereof or any
termination of this Agreement.
6. Rule 144. The Company will file the reports required to be filed
--------
by it under the Securities Act and the Exchange Act, and will cooperate with any
Holder (including without limitation by making such representations as any such
Holder may reasonably request), all to the extent required from time to time to
enable such Holder to sell Registrable Securities without registration under the
Securities Act within the limitations of the exemptions provided by Rule 144.
Upon the request of any Holder, the Company will deliver to such Holder a
written statement as to whether it has complied with such filing requirements.
Notwithstanding the foregoing, nothing in this Section 6 will be deemed to
require the Company to register any of its securities under any section of the
Exchange Act.
7. Underwritten Registrations. If any of the Registrable Securities
--------------------------
covered by the Shelf Registration Statement are to be sold in an underwritten
offering, the managing underwriter that will administer the offering will be
selected by the Holders of a majority of the Registrable Securities included in
such resale so long as such managing underwriter shall be reasonably
satisfactory to the Company; provided, however, that the Company shall have the
-------- -------
right to select any co-managing underwriters so long as such co-managing
underwriters shall be reasonably satisfactory to the such Holders.
8. Miscellaneous.
-------------
(a) Remedies. In the event of a breach by the Company of its
--------
obligations under this Agreement, each Holder, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific
<PAGE>
performance of its rights under this Agreement. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by it of any of the provisions of this Agreement and hereby further
agrees that, in the event of any action for specified performance in respect of
such breach, it will waive the defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company has not, as of the
--------------------------
date hereof, and will not, on or after the date hereof, enter into any agreement
with respect to its securities which is inconsistent with the rights granted to
the Holders in this Agreement or otherwise conflicts with the provisions hereof.
(c) Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of the
Holders of 90% of the then-outstanding Registrable Securities. Notwithstanding
the foregoing, a waiver or consent to depart from the provisions hereof with
respect to a matter that relates exclusively to the rights of the Holders whose
securities are being sold pursuant to the Shelf Registration Statement and that
does not directly or indirectly affect the rights of other Holders may be given
by Holders of at least 75% of the Registrable Securities being sold by such
Holders; provided, however, that the provisions of this sentence may not be
-------- -------
amended, modified, or supplemented except in accordance with the provisions of
the immediately preceding sentence.
(d) Notices. All notices and other communications provided for
-------
or permitted hereunder shall be made in writing and will be deemed given (i)
when made, if made by hand delivery, (ii) upon confirmation, if made by
telecopier, or (iii) one business day after being deposited with a reputable
next-day courier, to the parties as follows:
(x) if to the Company, initially at 1010 Wisconsin Avenue,
N.W., Washington, D.C. 20007, Telecopier (202) 965-4455, Attention: Corporate
Secretary, and thereafter at such other address, notice of which is given to the
Holders in accordance with the provisions of this Section 8(d); and
(y) if to any Holder, at the most current address given by
such Holder to the Company in accordance with the provisions of this Section
8(d).
(e) Owner of Registrable Securities. The Company will maintain,
-------------------------------
or will cause its registrar and transfer agent to maintain, a stock book with
respect to the Common Stock, in which all transfers of Registrable Securities of
which the Company has received notice will be recorded. The Company may deem and
treat the person in whose name Registrable Securities are registered in the
stock book of the Company as the owner thereof for all purposes, including
without limitation the giving of notices under this Agreement.
(f) Successors and Assigns. This Agreement will inure to the
----------------------
benefit of and be binding upon the successors and assigns of each of the parties
(including any pledgee of Registrable Securities acquiring such Registrable
Securities as collateral from the Holder) and will inure to the benefit of each
Holder.
<PAGE>
Notwithstanding the foregoing, no transferee will have any of the rights granted
under this Agreement (i) until such transferee shall have acknowledged its
rights and obligations hereunder by a signed written statement of such
transferee's acceptance of such rights and obligations, (ii) if the transferor
notifies the Company in writing on or prior to such transfer that the transferee
shall not have such rights, or (iii) with respect to specific Registrable
Securities, if such transferee was not a party to this Agreement on the date
hereof (or an affiliate of a party hereto) and acquired such Registrable
Securities in open-market purchases or pursuant to an underwritten public
offering.
(g) Counterparts. This Agreement may be executed in any number
------------
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed will be deemed to be an original and all of which taken
together will constitute one and the same instrument.
(h) Headings. The headings in this Agreement are for convenience
--------
of reference only and will not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT WILL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAWS.
(j) Severability. If any term, provision, covenant or
------------
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein will remain in full force and effect
and will in no way be affected, impaired or invalidated, and the parties hereto
will use their best efforts to find and employ an alternative means to achieve
the same or substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such which may
be hereafter declared invalid, void or unenforceable.
(k) Entire Agreement. This Agreement is intended by the parties
----------------
as a final expression of their agreement and is intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the registration rights granted by the Company with respect to the
Registrable Securities. This Agreement supersedes all prior agreements and
understandings among the parties with respect to such registration rights.
(l) Attorneys' Fees. In any action or proceeding brought to
---------------
enforce any provision of this Agreement, or where any provision hereof is
validly asserted as a defense, the prevailing party, as determined by the court,
will be entitled to recover reasonable attorneys' fees in addition to any other
available remedy.
(m) Termination. This Agreement shall terminate, and thereby
-----------
become null and void, on the tenth anniversary of the date hereof; provided,
--------
however, that the provisions of Section 5 and Sections 8(i) and (l) shall
- -------
survive the termination of this Agreement.
<PAGE>
IN WITNESS HEREOF, the parties have executed a counterpart signature
page of this Agreement as of the date first above written.
MERISTAR HOTELS & RESORTS, INC.
By:
----------------------------------
Name:
Title:
OAK HILL CAPITAL PARTNERS, L.P.
By: OHCP GenPar, L.P., its general partner
By: OHCP MGP, LLC, its general partner
By:
----------------------------------
Name:
Title:
OAK HILL CAPITAL MANAGEMENT PARTNERS, L.P.
By: OHCP GenPar, L.P., its general partner
By: OHCP MGP, LLC, its general partner
By:
----------------------------------
Name:
Title:
<PAGE>
Exhibit 10.12
AGREEMENT OF LIMITED PARTNERSHIP
of
MIP LESSEE, LP
March 31, 1999
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
Page
----
<S> <C>
1. Definitions 1
2. Formation 14
3. Name; Principal and Registered Offices; Agent for Service of Process 14
4. Term 14
5. Purposes 14
6. Competition 15
7. Representations and Covenants 17
8. OHTE Subsidiaries; Capital Contributions 18
9. Capital Accounts; Allocations 24
10. Distributions; Use of Partnership Funds 27
11. Books and Records; Tax Matters 31
12. Bank Accounts 33
14. Transfer of Partnership Interests 46
15. Dissolution and Liquidation; Bankruptcy or Insolvency of a Partner 53
16. Further Assurances 57
17. Notices 57
18. Captions 58
19. Counterparts 58
20. Governing Law 58
21. Successors and Assigns 58
22. Invalidity 58
23. Fair Market Value 58
24. Special Purpose Entity Provisions 60
Exhibits
A Initial Commitments; Initial Percentage Interests
B Form of Management Agreement
C Form of Operating Lease
D Hotels Not Subject to Exclusivity Agreement
E. Distribution Example
</TABLE>
<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP
of
MIP LESSEE, LP
This AGREEMENT OF LIMITED PARTNERSHIP (this "Agreement") dated as of
---------
May ____, 1999, by and among MIP GP, LLC, a Delaware limited liability company,
having an office at 1010 Wisconsin Avenue, N.W., Washington, D.C. 20007, as a
general partner ("Opco GP"), MIP Gen Par, LLC, a Delaware limited liability
-------
company, having an office at 65 East 55th Street, New York, New York 10022, as a
general partner ("Oak Hill GP"; together with Opco GP, the "General Partners"),
----------- ----------------
MeriStar H & R Operating Company, L.P., a Delaware limited partnership, having
an office at 1010 Wisconsin Avenue, N.W., Washington, D.C. 20007, as a limited
partner ("Opco LP"), Oak Hill Capital Management Partners, L.P., a Delaware
-------
limited partnership, as a limited partner ("OHCMP"), Oak Hill Capital Partners,
-----
L.P., a Delaware limited partnership, having an office at 65 East 55th Street,
New York, New York 10022, as a limited partner ("Oak Hill Parent" and, together
with OHCMP, Opco LP and any Person hereafter admitted to the Partnership (as
hereinafter defined) as a limited partner in accordance with the provisions of
the Agreement (including Section 8.1), the "Limited Partners"). For purposes of
----------------
this Agreement, the limited partnership interest in the Partnership held by Oak
Hill Parent shall be deemed to consist of two separate limited partnership
interests, and Oak Hill Parent shall sometimes be hereinafter referred to as
"Oak Hill LP," in its capacity as the holder of one such interest, and "OHTE",
in its capacity as the holder of the other such interest.
W I T N E S S E T H :
-------------------
WHEREAS, the General Partners and the Limited Partners (collectively,
the "Partners" and individually, a "Partner") desire to form a limited
-------- -------
partnership for the purposes hereinafter set forth;
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions. As used in this Agreement, the following terms
-----------
shall have the respective meanings set forth below.
1.1 "Act" shall have the meaning set forth in Article 2.
---
<PAGE>
5
1.2 "Act of Insolvency" shall have the meaning set forth in
-----------------
Section 15.4.
1.3 "Adjusted Capital Account" shall mean, with respect to any
------------------------
Partner, such Partner's Capital Account balance, increased by such Partner's
share of Partnership Minimum Gain and Partner Minimum Gain.
1.4 "Affiliate," when used with respect to a Person, shall mean
---------
a Person which, directly or indirectly, controls, is controlled by or is under
common control with such Person. For the purposes of this definition, "control"
-------
shall mean the power to direct the management and policies of a Person. In
addition to the foregoing, the term "Affiliate" shall mean at any time with
---------
respect to each of Oak Hill GP, Oak Hill LP, OHCMP, OHTE and the OHTE
Subsidiaries (as hereinafter defined), if any, the then-current investment
advisor or asset manager of Oak Hill Parent and any officer, shareholder (unless
such shareholder is not at the time actively involved in the operation and
management of such advisor's business), director or executive employee thereof
or any Person which is, directly or indirectly, controlled by such investment
advisor and/or one or more of such individuals.
1.5 "Allocated Required Purchase Price" shall have the meaning
---------------------------------
set forth in Section 14.3.
1.6 "Affiliated Partner" shall have the meaning set forth in
------------------
Section 13.10.
1.7 "Appraiser" shall have the meaning set forth in Section
---------
23.1.
1.8 "Available Cash" for any period shall mean the Partnership's
--------------
share of cash distributions made by the Underlying Partnership, as well as the
operating cash flow, Capital Proceeds and other income generated by the
Partnership's business, during such period (including for this purpose reserves
set aside during a previous period, to the extent the same are determined by the
Management Committee to be available for distribution in the current period), in
each case after payment of operating expenses, debt service (including the
payment of interest and principal) and any other amounts due and payable in
respect of any borrowings of the Partnership (other than Voluntary Loans and
Priority Loans), if any, and after setting aside any reserves the
<PAGE>
6
Management Committee reasonably determines are necessary to meet the projected
expenses of the Partnership (excluding the cost of funding the acquisition of
Hotel Interests by the Underlying Partnership). The term "Available Cash" shall
not include the proceeds of any loans made to the Partnership or the amount of
any capital contributions made to the Partnership, except to the extent the
Management Committee determines the same are available for distribution to the
Partners.
1.9 "Capital Account" shall mean the capital account of a
---------------
Partner, maintained as set forth in Section 9.2.
1.10 "Capital Improvement," when used with reference to a Hotel
-------------------
(as defined in this Article 1), shall mean any alteration, replacement, addition
or improvement of or to such Hotel (including, without limitation, to the
appliances, machinery, devices, fixtures, equipment, furniture, furnishings and
other similar articles of tangible personal property located at such Hotel or
used or useful in connection therewith (collectively, the "FF&E" of such Hotel))
----
the cost of which for Federal income tax purposes may not be deducted as an
expense but must be capitalized and amortized over the life of such alteration,
replacement, addition or improvement.
1.11 "Capital Proceeds" shall mean, with respect to the
----------------
Partnership or the Underlying Partnership, any net excess insurance proceeds,
the net proceeds of the sales of Hotel Interests (or, in the case of the
Partnership, the sale of all or any portion of its interest in the Underlying
Partnership), the net proceeds received in connection with partial
condemnations, financings and refinancings and any other similar items which, in
accordance with generally accepted accounting principles, are attributable to
capital (in each case, after payment of all amounts due in respect of any
borrowings of the Partnership or the Underlying Partnership, other than
Voluntary Loans or Priority Loans). The term "Capital Proceeds" shall also
mean, with respect to the Partnership, distributions received by the Partnership
from the Underlying Partnership on account of Capital Proceeds received by the
Underlying Partnership.
1.12 "Change in Control" shall mean, with respect to MHR, the
-----------------
occurrence of any of the following: (i) the sale, lease or transfer, in one or
a series of related transactions, of all or substantially all of MHR's assets to
any person or group (as such term is used in Section 13(d)(3) of the Exchange
Act), (ii) the adoption of a plan relating to the liquidation or dissolution of
MHR, (iii) the acquisition by any person or group (as such term is used in
Section 13(d)(3) of the Exchange Act), excluding the "Oak Hill Group" (as
defined below), of a direct or indirect interest in more than 35% of the
<PAGE>
7
ownership of MHR or the voting power of the voting stock of MHR by way of
purchase, merger or consolidation or otherwise (other than a creation of a
holding company that does not involve a change in the beneficial ownership of
MHR as a result of such transaction), provided, that any "Current Voting Stock"
-------- --------------------
(as defined below) shall not be counted in determining whether such 35%
ownership has been achieved, (iv) the merger or consolidation of MHR with or
into another corporation or the merger of another corporation into MHR with the
effect that immediately after such transaction the stockholders of MHR
immediately prior to such transaction hold less than 50% of the total voting
power of all securities generally entitled to vote in the election of directors,
managers, or trustees of the Person surviving such merger or consolidation or
(v) the first day on which a majority of the members of the Board of Directors
of MHR are not Continuing Directors. As used herein: the term "Oak Hill Group"
--------------
shall mean (i) those persons who filed a Schedule 13D with the Securities and
Exchange Commission on or about September 18, 1998 with respect to MHR, (ii) all
persons who are members of a group with the persons referred to under subclause
(i), and (iii) any Affiliate of Oak Hill GP, Oak Hill LP, OHCMP, OHTE or the
OHTE Subsidiaries; and the term "Current Voting Stock" shall mean the 3,221,409
--------------------
shares of voting stock owned by the Oak Hill Group on the date hereof plus all
shares acquired by the Oak Hill Group after the date hereof pursuant to the
Stock Purchase Agreement.
1.13 "Code" shall mean the Internal Revenue Code of 1986, as
----
heretofore amended and as the same may be amended from time to time.
1.14 "Commitment" shall mean, with respect to a Partner, the
----------
amount of such Partner's capital commitment to the Partnership, as set forth
opposite such Partner's name on Exhibit A.
---------
1.15 "Commitment Expiration Date" shall mean the first
--------------------------
anniversary of the date of this Agreement.
1.16 "Continuing Directors" means, as of any date of
--------------------
determination, any member of the Board of Directors of MHR who (i) was a member
of such Board of Directors on the date hereof or (ii) was nominated for election
or elected to such Board of Directors with the affirmative vote of at least a
majority of the Continuing Directors who were members of such Board at the time
of such nomination or election.
1.17 "Contribution Notice" shall have the meaning set forth in
-------------------
Section 8.2(a).
<PAGE>
8
1.18 "Defaulting Partner" shall have the meaning set forth in
------------------
Section 8.3.
1.19 "Default Loan" shall have the meaning set forth in Section
------------
8.3.
1.20 "Deficit Partner" shall have the meaning set forth in
---------------
Section 9.11.
1.21 "Depreciation" shall mean, with respect to any Fiscal Year,
------------
an amount equal to the depreciation, amortization or other cost recovery
deduction allowable with respect to an asset for Federal income tax purposes,
except that if the Gross Asset Value of the asset differs from its adjusted tax
basis, Depreciation shall be determined in accordance with the methods used for
Federal income tax purposes and shall equal the amount that bears the same ratio
to the Gross Asset Value of such asset as the depreciation, amortization or
other cost recovery deduction computed for Federal income tax purposes with
respect to such asset bears to the adjusted Federal income tax basis of such
asset; provided, however, that if any such asset that is depreciable or
amortizable has an adjusted Federal income tax basis of zero, the rate of
Depreciation shall be as determined by the "tax matters partner."
1.22 "Effective Tax Rate" shall mean, for any year, the
------------------
percentage determined by the General Partners to be a reasonable estimate of the
highest marginal combined Federal, state and local income tax rate (giving
effect to the deduction of state and local income taxes, as applicable, for
Federal and state income tax purposes), applicable to corporations all of the
income of which is allocable to New York City or individuals residing in New
York City (whichever is higher), with respect to the taxable income allocated to
the Partners by the Partnership for Federal income tax purposes.
1.23 "Electing Partner" shall have the meaning set forth in
----------------
Section 14.4.4.
1.24 "equity interests" in an entity shall mean interests which
----------------
give the holders thereof a share in the distributions, income and losses of such
entity.
1.25 "Exchange Act" means the Securities Exchange Act of 1934,
------------
as amended.
<PAGE>
9
1.26 "Exclusivity Period" shall mean the period commencing on
------------------
the date hereof and expiring on the earliest to occur of (a) the termination of
the Partnership, (b) the date upon which the Underlying Partnership has invested
at least $375,000,000 in Hotel Interests and (c) the Commitment Expiration Date.
1.27 "Exempt Person" shall have the meaning set forth in Section
-------------
14.5.
1.28 "FF&E" shall have the meaning set forth in the definition
----
of "Capital Improvements" set forth in this Article 1.
1.29 "Fiscal Year" or "fiscal year" shall mean the calendar
----------- -----------
year. "Fiscal Year" or "fiscal year" shall also be deemed to mean and include
that fraction of a Fiscal Year commencing on the date hereof and ending on
December 31, 1999, and that fraction, if any, of a Fiscal Year ending on the
last day of the term of this Agreement.
1.30 "FMV Date" shall have the meaning set forth in Section
--------
23.1.
1.31 "GAAP" shall mean generally accepted accounting principles
----
consistently applied.
1.32 "General Partners" shall have the meaning set forth in the
----------------
preamble to this Agreement.
1.33 "Go-Along Notice" shall have the meaning set forth in
---------------
Section 14.4.1.
1.34 "Go-Along Option" shall have the meaning set forth in
---------------
Section 14.4.2.
1.35 "Go-Along Percentage" shall have the meaning set forth in
-------------------
Section 14.4.1.
1.36 "Go-Along Purchaser" shall have the meaning set forth in
------------------
Section 14.4.1.
<PAGE>
10
1.37 "Go-Along Terms" shall have the meaning set forth in
--------------
Section 14.4.1.
1.38 "Gross Asset Value" shall mean, with respect to any asset,
-----------------
the asset's adjusted basis for Federal income tax purposes, except that (i) the
Gross Asset Value of any asset contributed to the Partnership shall be its gross
fair market value (as determined by the General Partners) at the time of
contribution, (ii) upon a change in the Partners' Percentage Interests, the
Gross Asset Value of all of the assets of the Partnership shall be adjusted to
equal their respective gross fair market values, as determined by the General
Partners, (iii) the Gross Asset Value of any asset distributed in kind to any
Partner (including upon a liquidation of the Partnership) shall be the gross
fair market value of such asset, as reasonably determined by the General
Partners on the date of such distribution, and (iv) the Gross Asset Value of any
asset determined pursuant to clauses (i) or (ii) above shall thereafter be
adjusted from time to time by the Depreciation taken into account with respect
to such asset for purposes of determining Net Profit or Net Loss.
1.39 "Gross Profit" shall mean, with respect to any fiscal year,
------------
the items of income and gain of the Partnership, computed on the same basis that
Net Profit and Net Loss are computed (other than the adjustment described in
clause (vi) of the definition of Net Profit and Net Loss).
1.40 "Hotel" shall mean any hotel and/or resort property, or any
-----
mixed-use property a substantial component of which is a hotel and/or resort,
and shall include the land (or a leasehold interest therein), buildings, FF&E
and other personal property (including, without limitation, contract rights and
other intangible assets) constituting a portion of, or associated with or used
or useful in connection with, such property. Supplementing the foregoing, (i)
the term "Hotel" shall include any building or complex of buildings which is
undergoing renovation or alteration or is under construction and which, after
such renovation, alteration or construction is completed as intended, would
qualify as a "Hotel" pursuant to the immediately preceding sentence and (ii) the
term "Hotel" shall include any vacant land adjacent to property of the nature
hereinabove set forth, to the extent such land is acquired or to be acquired
together with such property.
1.41 "Hotel Debt" shall mean secured debt for which one or more
----------
Hotel Interests are a substantial part of the security.
<PAGE>
11
1.42 "Hotel Equity Interests" shall have the meaning set forth
----------------------
in the definition of "Hotel Interests" set forth in this Article 1.
1.43 "Hotel Interests" shall mean, collectively, (i) Hotels,
---------------
(ii) direct or indirect equity interests in Persons that own Hotels or that
lease Hotels, (iii) undivided interests in Hotels and leasehold interests in
Hotels, and (iv) Hotel Debt (and undivided interests therein) and direct or
indirect equity interests in Persons that hold Hotel Debt. The interests
described in the foregoing clauses (ii) and (iii) are collectively referred to
herein as "Hotel Equity Interests". Notwithstanding the foregoing, the term
----------------------
"Hotel Interests" shall not include (i) the manager's interest under any hotel
management agreement or similar arrangement, (ii) the lessee's interest under
any lease that creates a relationship between the parties thereto substantially
similar to the relationship between an owner and operator in a customary hotel
management agreement or (iii) the lessee's interest under any "operating lease"
of the type customarily entered into by real estate investment trusts which
directly or indirectly own hotel properties.
1.44 "IRR" shall mean, with respect to the Oak Hill Partners
---
(including, for this purpose, Oak Hill Parent or OHCMP as the purchaser of
shares in MHR pursuant to the Stock Purchase Agreement), the annual internal
rate of return (compounded by discounting on a quarterly basis) realized by such
Partners in the aggregate, taking into account (i) the aggregate capital
contributions made to the Partnership by such Partners, (ii) the aggregate
purchase price paid by Oak Hill Parent or OHCMP for shares in MHR pursuant to
the Stock Purchase Agreement, (iii) the aggregate distributions of cash and
marketable securities by the Partnership to such Partners pursuant to Section
10.1, amounts received by any Oak Hill Partner in respect of any sale of an
interest in an Operating Subsidiary, and amounts received by OHTE in respect of
the sale of stock in an OHTE Subsidiary, (iv) any proceeds received by Oak Hill
Parent or OHCMP from the sale of the stock referred to in clause (ii), and (v)
the timing of the capital contributions, the purchase of shares in MHR and the
distributions, payments and receipt of sale proceeds referred to in the
preceding clauses (it being understood that fees payable by the Underlying
Partnership to any Affiliate of Oak Hill Parent shall not be deemed a
distribution to an Oak Hill Partner for purposes of calculating the IRR of the
Oak Hill Partners). For purposes of the foregoing calculation, if at the time
the Partnership disposes of all or substantially all of its assets, the stock of
MHR held by Oak Hill Parent or OHCMP has not yet been sold, such stock shall be
deemed to have been sold at such time for an amount determined as set forth in
Section 10.5.
<PAGE>
12
1.45 "Initial OHTE Subsidiary" shall have the meaning set forth
-----------------------
in Section 8.1.
1.46 "Intercompany Agreement" shall have the meaning set forth
----------------------
in Article 6.
1.47 "Internal Representations" shall have the meanings et forth
------------------------
in Section 13.5(d).
1.48 "investment company" shall have the meaning set forth in
------------------
Section 13.5(b).
1.49 "Joint Venture Opportunity" shall mean an acquisition
-------------------------
opportunity which is offered to an Oak Hill Person or Opco Person by another
Person which proposes to acquire the Hotel Interest in question jointly (whether
through a partnership, limited liability company or other entity, or otherwise)
with such Oak Hill Person or Opco Person, but only if such Oak Hill Person or
Opco Person is a minority owner in the entity in question.
1.50 "Limited Partners" shall have the meaning set forth in the
----------------
preamble to this Agreement.
1.51 "Management Agreement" shall have the meaning set forth in
--------------------
Section 13.8.
1.52 "Management Committee" shall have the meaning set forth in
--------------------
Section 13.1.
1.53 "Managing Agent" shall have the meaning set forth in
--------------
Section 13.8.
1.54 "Maximum Amount" shall have the meaning set forth in
--------------
Section 14.4.1.
1.55 "MHOP" shall mean MeriStar Hospitality Operating
----
Partnership, L.P., a Delaware limited partnership.
1.56 "MHR" shall mean MeriStar Hotels & Resorts, Inc., a
---
<PAGE>
13
Delaware corporation.
1.57 "Minor Capital Improvements" shall have the meaning set
--------------------------
forth in Section 13.5(e).
1.58 "Net Profit" or "Net Loss" shall mean, with respect to any
---------- --------
fiscal year, the taxable income or loss of the Partnership as determined for
Federal income tax purposes, with the following adjustments:
(i) Such taxable income or loss shall be adjusted by
the amount, if any, of tax-exempt income received or accrued by the Partnership;
(ii) Such taxable income or loss shall be adjusted by
the amount, if any, of all expenditures of the Partnership described in Section
705(a)(2)(B) of the Code, including expenditures treated as described therein
under (S) 1.704-1(b)(2)(iv)(i) of the Treasury Regulations;
(iii) If the Gross Asset Value of any asset is adjusted
pursuant to clause (ii) or (iii) of the definition of Gross Asset Value, the
amount of such adjustment shall be taken into account, immediately prior to the
event giving rise to such adjustment, as gain or loss from the disposition of
such asset for purposes of computing Net Profit or Net Loss;
(iv) Gain or loss resulting from any disposition of
any asset with respect to which gain or loss is recognized for Federal income
tax purposes shall be computed by reference to the Gross Asset Value of the
asset disposed of, notwithstanding that such Gross Asset Value differs from the
adjusted tax basis of such asset;
(v) In lieu of the depreciation, amortization, or
other cost recovery deductions taken into account in computing such taxable
income or loss, there shall be taken into account Depreciation for such fiscal
year; and
(vi) Any items of Gross Profit specially allocated
pursuant to Article 9 for such fiscal year shall be eliminated in computing Net
Profit or Net Loss.
<PAGE>
14
1.59 "Non-Defaulting Partner" shall have the meaning set forth
----------------------
in Section 8.3.
1.60 "Non-Qualified Partner" shall have the meaning set forth in
---------------------
Section 15.3.
1.61 "Nonrecourse Deductions" shall have the meaning set forth
----------------------
in (S) 1.704-2(b)(1) of the Treasury Regulations. The amount of Nonrecourse
Deductions for any year equals the excess, if any, of the net increase in the
amount of Partnership Minimum Gain during such year over the aggregate amount of
any distributions during such year of proceeds of a Nonrecourse Liability that
are allocable to an increase in Partnership Minimum Gain, determined in
accordance with (S) 1.704-2(c) of the Treasury Regulations.
1.62 "Nonrecourse Liability" shall have the meaning set forth in
---------------------
(S) 1.704-2(b)(3) of the Treasury Regulations.
1.63 "Non-Transfer Option" shall have the meaning set forth in
-------------------
subsection 14.4.2.
1.64 "notices" shall have the meaning set forth in Section 17.1.
-------
1.65 "Oak Hill GP" shall have the meaning set forth in the
-----------
preamble to this Agreement.
1.66 "Oak Hill LP" shall have the meaning set forth in the
-----------
preamble to this Agreement.
1.67 "Oak Hill Parent" shall have the meaning set forth in the
---------------
preamble to this Agreement.
1.68 "Oak Hill Partners" shall mean, collectively, Oak Hill GP,
-----------------
Oak Hill LP, OHCMP, OHTE (if it is then a Partner) and any OHTE Subsidiaries
which hereafter become Partners.
1.69 "Oak Hill Person" shall mean and include (i) any Oak Hill
---------------
Partner, (ii) Oak Hill Parent or (iii) any Affiliate of any Oak Hill Partner if
Oak Hill Capital Management, Inc. or any successor or Affiliate thereof is
primarily responsible
<PAGE>
15
for the acquisition, investment or other transaction in question (as investment
advisor or otherwise) for such Affiliate or its direct or indirect controlling
Person; provided that the term "Oak Hill Person" shall not include Keystone,
Inc., RMB Realty Inc. or any Person controlled by or under common control with
Keystone, Inc. or RMB Realty, Inc.
1.70 "OHCMP" shall have the meaning set forth in the preamble to
-----
this Agreement.
1.71 "OHTE" shall have the meaning set forth in the preamble to
----
this Agreement.
1.72 "OHTE Capital Contributions" shall have the meaning set
--------------------------
forth in Section 8.2(a).
1.73 "OHTE Initial Contribution Date" shall mean April 15, 1999.
------------------------------
1.74 "OHTE Subsidiary" shall have the meaning set forth in
---------------
Section 8.1.
1.75 "Opco GP" shall have the meaning set forth in the preamble
-------
to this Agreement.
1.76 "Opco LP" shall have the meaning set forth in the preamble
-------
to this Agreement.
1.77 "Opco Partners" shall mean, collectively, Opco GP and Opco
-------------
LP.
1.78 "Opco Person" shall mean and include any Opco Partner and
-----------
any Affiliate of any Opco Partner (including without limitation MHR); provided
that in no event shall "Opco Person" include MHOP, MeriStar Hospitality
Corporation, a Maryland corporation, or any of their respective subsidiaries.
1.79 "Operating Leases" shall have the meaning set forth in
----------------
Article 5.
1.80 "Operating Subsidiary" shall have the meaning set forth in
--------------------
<PAGE>
16
Section 13.7.
1.81 "Originating Party" shall have the meaning set forth in
-----------------
Section 6.2.
1.82 "Overall Percentage Interest," with respect to each
---------------------------
Partner, shall mean a percentage equal to the fraction obtained by dividing such
Partner's aggregate capital contributions by the total capital contributions of
all Partners.
1.83 "Partner" shall mean each of the parties to this Agreement
-------
and any other Person to which an interest in the Partnership is hereafter
transferred and who is admitted to the Partnership in accordance with the terms
of this Agreement.
1.84 "Partner Minimum Gain" shall mean "partner nonrecourse debt
--------------------
minimum gain" as defined in (S) 1.704-2(i)(2) of the Treasury Regulations and
determined in accordance with (S) 1.704-2(i)(3) of the Treasury Regulations.
1.85 "Partner Nonrecourse Debt" shall have the meaning set forth
------------------------
in (S) 1.704-2(b)(4) of the Treasury Regulations.
1.86 "Partner Nonrecourse Deductions" shall have the meaning set
------------------------------
forth in (S) 1.704-2(i)(1) of the Treasury Regulations and shall be determined
in accordance with (S) 1.704-2(i)(2) of the Treasury Regulations.
1.87 "Partnership" shall have the meaning set forth in Article
-----------
2.
1.88 "Partnership Interest," when used with reference to a
--------------------
Partner, shall mean the interest of such Partner in the Partnership.
1.89 "Partnership Minimum Gain" shall have the meaning set forth
------------------------
in (S) 1.704-2(b)(2) of the Treasury Regulations and shall be determined in
accordance with (S) 1.704-2(d) of the Treasury Regulations.
1.90 "Permitted MHR Transferee" shall mean a Person which (i) is
------------------------
a successor to MHR by merger, consolidation or other similar transaction or (ii)
acquires all or a substantial portion of the assets of MHR.
1.91 "Permitted Opco Transferee" shall mean a Person which
-------------------------
<PAGE>
17
(i) is a successor to Opco LP by merger, consolidation or other similar
transaction or (ii) acquires all or a substantial portion of the management
business of Opco LP.
1.92 "Person" shall mean an individual, partnership, limited
------
liability company, corporation, trust, unincorporated association or any other
legal entity.
1.93 "Preliminary Proposal" shall mean, with respect to a Hotel
--------------------
Interest, a reasonably detailed description of the Hotel in question, a general
business plan and projections with respect thereto, a description of the market
in which such Hotel is located and a description of competing hotels in such
market, and such other information as is reasonably necessary to enable the
Partnership to determine, on a reasonably informed basis, whether to acquire
such Hotel Interest.
1.94 "Priority Loan" shall have the meanings et forth in
-------------
Section 8.5.
1.95 "Prime Rate" shall mean the "base rate" (or its
----------
equivalent) announced from time to time by Citibank, N.A. at its principal
office in New York City.
1.96 "Proportionate Share" shall have the meaning set forth in
-------------------
Section 8.2.
1.97 "Purchase Price" shall have the meaning set forth in
--------------
Section 15.3.
1.98 "Purchasing Partner" shall have the meaning set forth in
------------------
Section 15.3.
1.99 "Qualified Opco Entity" shall have the meaning set forth
---------------------
in Section 14.2.
1.100 "Recourse Indemnity" shall have the meaning set forth in
------------------
Section 8.5.
1.101 "Regulatory Allocations" shall have the meaning set forth
----------------------
in Section 9.12.
1.102 "Representative" or "Representatives" shall have the
-------------- ---------------
<PAGE>
18
meaning set forth in Section 13.1.
1.103 "Requested Amount" shall have the meaning set forth in
----------------
Section 8.3.
1.104 "Required Purchase" shall have the meaning set forth in
-----------------
Section 14.3(a).
1.105 "Required Purchase Offer" shall have the meaning set forth
-----------------------
in Section 14.3(a).
1.106 "Required Purchase Price" shall have the meaning set forth
-----------------------
in Section 14.3(a).
1.107 "Required Purchaser" shall have the meaning set forth in
------------------
Section 14.3(a).
1.108 "Selling Partner" shall have the meaning set forth in
---------------
Section 14.4.1.
1.109 "Stock Purchase Agreement" shall mean that certain Stock
------------------------
Purchase Agreement of even date herewith between MHR, Oak Hill Parent and OHCMP
pursuant to which Oak Hill Parent has agreed to purchase certain shares in MHR
and has been given an option to purchase additional such shares.
1.110 "Tax Advance" shall have the meaning set forth in Section
-----------
10.2.
1.111 "tax matters partner" shall have the meaning set forth in
-------------------
Section 11.7.
1.112 "Transaction Documents" shall have the meaning set forth
---------------------
in Article 7.
1.113 "Transfer" shall mean, with respect to any Partnership
--------
Interest (or, if applicable, a direct or indirect interest in a Partner), the
sale, transfer, assignment or other disposition of, or the mortgaging,
hypothecation, pledging or other encumbrancing, or the permitting or sufferance
of any encumbrance of, all or any portion
<PAGE>
19
of such Partnership Interest (or such interest).
1.114 "Treasury Regulations" shall mean the Income Tax
--------------------
Regulations promulgated under the Code, as amended from time to time.
1.115 "Underlying Partnership" shall mean MeriStar Investment
----------------------
Partners, L.P., a Delaware limited partnership.
1.116 "Underlying Partnership Agreement" shall mean that certain
--------------------------------
Agreement of Limited Partnership of the Underlying Partnership, dated of even
date herewith, between the Partnership, as general partner, and MHOP, as limited
partner.
1.117 "Voluntary Loan" shall have the meaning set forth in
--------------
Section 8.5(A).
2. Formation. The Partners hereby form a limited partnership (the
---------
"Partnership") under the Revised Uniform Limited Partnership Act of the State of
- ------------
Delaware (the "Act") for the purposes set forth herein.
---
3. Name; Principal and Registered Offices; Agent for Service of
------------------------------------------------------------
Process.
- -------
3.1 The name of the Partnership is MIP LESSEE, LP, and its
business shall be conducted under that name or any variation thereof that the
General Partners deem appropriate. The Partnership's principal office shall be
at 1010 Wisconsin Avenue, N.W., Suite 650, Washington, D.C. 20007, or such other
place in Washington, D.C. or New York City, or in the vicinity of either such
city, as the Management Committee shall from time to time determine.
3.2 The Partnership's registered office within the State of
Delaware shall be c/o CT Corporation, 1209 Orange Street, Wilmington, Delaware
19801.
3.3 The registered agent of the Partnership for service of
process within the State of Delaware shall be CT Corporation, 1209 Orange
Street, Wilmington, Delaware 19801. In the event that the Person at any time
acting as such agent shall cease to act as such agent for any reason, Opco GP,
with the approval of Oak Hill GP, shall appoint a substitute agent. Such agent
shall be the agent of the Partnership
<PAGE>
20
on which any process, notice or demand required or permitted by law to be served
on the Partnership may be served.
4. Term. The term of the Partnership shall commence upon the filing
----
of a certificate of limited partnership with respect to the Partnership with the
Secretary of State of Delaware and shall continue until March 31, 2049, unless
earlier terminated by agreement of the Partners or as otherwise provided in this
Agreement.
5. Purposes. The purposes of the Partnership shall be (i) to act as
--------
the general partner of the Underlying Partnership, (ii) to enter into leases
(the "Operating Leases"), as lessee, with the Underlying Partnership or one of
----------------
its subsidiaries, as lessor, for the operation of the Hotels, and (iii) to enter
into any and all contracts or agreements to implement each of the foregoing and
do all things incidental to the foregoing, in all cases upon and subject to the
terms and conditions of this Agreement. All of the foregoing activities may be
conducted by the Partnership directly or indirectly through one or more
subsidiaries. The purpose of the Underlying Partnership is to acquire and own
Hotel Interests and, directly or indirectly through one or more other entities,
to hold, own, manage, operate, lease, mortgage, alter, improve and sell, and in
all other respects to act as owner of, Hotels or, with respect to Hotel Debt, to
exercise, directly or indirectly through one or more entities, all rights to
which the holder of such debt is entitled. The Partnership is and shall be a
limited partnership formed only for the purposes described in the first sentence
of this Paragraph 5 and nothing contained in this Agreement shall be deemed to
create a partnership among the Partners with respect to any other activities.
6. Competition.
-----------
6.1 Except as hereinafter provided in this Article 6, and
subject in any event to the rights and obligations of MeriStar Hospitality
Corporation, MHOP, MHR and Opco LP under that certain Intercompany Agreement,
dated as of August 3, 1998 (the "Intercompany Agreement"), each Partner and its
----------------------
Affiliates, as well as its officers, directors, employees and direct and
indirect owners, may engage in or possess an interest in any other business
venture or ventures, including the construction, development, acquisition,
ownership, investment, operation and/or management of or in real estate
(including Hotels), whether or not in competition with any Hotel owned by the
Underlying Partnership, and neither the Underlying Partnership, the Partnership
nor the other Partners shall have any rights in or to such venture or ventures
or the income or profits derived therefrom.
<PAGE>
21
6.2 If, during the Exclusivity Period, any Oak Hill Person or
any Opco Person (any such Person, the "Originating Party") shall be presented
-----------------
with the opportunity to acquire any Hotel Interest (other than a Joint Venture
Opportunity), the Originating Party shall, before pursuing such opportunity on
its own behalf or on behalf of any other Person, present such proposed
acquisition to the Partnership for consideration as an investment by the
Underlying Partnership. The General Partners shall evaluate such proposed
acquisition in good faith and shall make their decision as to such acquisition
within 15 days after delivery of a Preliminary Proposal (if requested by either
General Partner) with respect thereto (it being agreed that (i) notwithstanding
anything to the contrary contained in this Agreement, the decision to cause the
Underlying Partnership to acquire a Hotel Interest shall require the approval of
both General Partners and (ii) the rejection of a Preliminary Proposal with
respect to an acquisition shall constitute a determination not to proceed with
such acquisition on behalf of the Underlying Partnership). If the General
Partners elect to proceed with such acquisition on behalf of the Underlying
Partnership, the Partnership shall use good faith efforts to cause such
acquisition to be concluded (provided, however, that nothing herein shall
require that such acquisition actually be concluded if the Underlying
Partnership is unable to reach agreement with the seller of such Hotel Interest
(and any other relevant third parties) as to the terms of or otherwise with
respect to the acquisition or if the Underlying Partnership otherwise determines
in good faith to abandon such acquisition). If the General Partners elect not to
proceed with such acquisition, then the Originating Party shall have the right
to pursue such acquisition opportunity; provided that if the General Partner
which is, or which is affiliated with, the Originating Party voted against
acquiring such Hotel Interest on behalf of the Underlying Partnership and the
other General Partner voted in favor of such acquisition, then the Originating
Party shall not have the right to pursue such acquisition opportunity other than
through the Underlying Partnership.
6.3 If the acquisition of a Hotel Interest is part of an
acquisition of assets and/or interests of which Hotel Interests are not,
collectively, a significant component, such acquisition shall not be subject to
the provisions of Section 6.2, provided that any Opco Person or Oak Hill Person
which makes such an acquisition shall, promptly after the consummation thereof,
notify the General Partners of the same.
6.4 Opco LP acknowledges and confirms that, with respect to
this Article 6, it is executing this Agreement in order to bind not only itself
but also all Opco Persons (whether now or hereafter in existence). Oak Hill
Parent acknowledges and confirms that it is executing this Agreement for the
purpose (and the sole purpose) of binding itself and also all other Oak Hill
Persons (whether now or hereafter in existence)
<PAGE>
22
to comply with this Article 6. Notwithstanding the foregoing, no Opco Person or
Oak Hill Person shall be deemed to be in violation of this Agreement if it, and
its direct or indirect officers, directors or principals, exercise, with respect
to any other Opco Person or Oak Hill Person, as applicable, its and their voting
or discretionary powers in a manner consistent with the provisions of this
Article 6.
6.5 Nothing contained herein shall be construed (a) as limiting
the ability of any Person to acquire any equity or debt interest (or increase
its existing equity or debt interest) in or with respect to any Hotel listed on
Exhibit D annexed hereto, (b) as limiting the ability of any Person to acquire
- ---------
assets (including, without limitation, Hotel Interests) pursuant to a
foreclosure, a deed in lieu of foreclosure, a workout or restructuring of debt
interests held by such Person or a reorganization or liquidation pursuant to the
United States Bankruptcy Code, or the bankruptcy or insolvency laws of any other
jurisdiction, of a Person that is a debtor of such Person, (c) as limiting the
ability of any Person to acquire direct or indirect debt or equity interests in
insurance companies, other financial institutions and other entities whose
primary business is not the ownership, operation and/or management of real
estate (including, without limitation, Hotels) or (d) as requiring any Person to
violate any fiduciary duty or obligation it may have to any other Person or
Persons (it being agreed that, for purposes of this clause (d), the term
"fiduciary duty" shall not include the duty to offer to any Person, as a
"partnership opportunity," "limited liability company opportunity" or "corporate
opportunity," the opportunity to acquire Hotel Interests).
6.6 Notwithstanding anything to the contrary contained in the
foregoing, the provisions of Section 6.2 shall not apply with respect to: (i)
golf courses; (ii) properties which are, and are intended after acquisition to
be, operated as time shares; (iii) conference centers; (iv) other Hotels, or
interests in other Hotels, which are not upscale or luxury full-service hotels;
or (v) Hotels, or interests in Hotels, located outside the United States, Canada
or the Caribbean. The provisions of this Article 6 are subject to the
provisions of the Intercompany Agreement, it being agreed that, to the extent
any Opco Person is required thereunder to present an acquisition opportunity to
MHOP or its general partner, it shall be permitted to do so without regard to
this Article 6 and shall be obligated to present such opportunity to the
Partnership only to the extent such opportunity is rejected by MHOP or its
general partner.
7. Representations and Covenants.
-----------------------------
(a) Each Partner warrants and represents to the others that (i)
it
<PAGE>
23
is a partnership, corporation or limited liability company, as applicable, duly
organized, validly existing and in good standing under the laws of the state in
which it was formed, (ii) it has the power, right, authority and legal capacity
to execute and deliver this Agreement and the documents referred to herein (the
"Transaction Documents") and to enter into and fully perform and observe the
---------------------
transactions contemplated hereby and thereby, (iii) the execution, delivery and
performance by it of this Agreement and the consummation by it of the
transactions contemplated hereby and by the Transaction Documents have been duly
authorized by all necessary action on behalf of such Partner, (iv) all of the
Persons who execute and deliver this Agreement and the Transaction Documents on
behalf of such Partner have been (or, at the time of such execution, will be)
duly authorized and empowered on behalf of such Partner so to do and to enter
into all transactions contemplated hereby and thereby, (v) this Agreement and
each Transaction Document to which it is a party is the valid and binding
obligation of such Partner enforceable against it in accordance with its terms,
except as the enforceability of such terms may be limited by bankruptcy,
insolvency, reorganization and other laws relating to or affecting the
enforcement of creditors' rights generally and by general equitable principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law), (vi) the execution, delivery and performance by it of this
Agreement and each Transaction Document to which it is a party, and the
consummation by it of the transactions contemplated hereby and thereby, will not
(A) violate any provision of any of its organizational documents, (B) except as
described in any other Transaction Document, require it to obtain any consent,
approval or action of, or make any filing with or give any notice to, any
Person, (C) assuming all required consents are obtained, violate, conflict with
or result in the breach of any of the terms of, result in a material
modification of the effect of, otherwise give any other contracting party the
right to terminate, or constitute (or with notice or lapse of time or both
constitute) a default (by way of substitution, novation or otherwise) under, any
agreement to which it or any of its Affiliates (whether now or formerly
existing) is or was a party or by or to which any of them or any of their
properties may be (or may have been) bound or subject, (D) violate any order,
judgment, injunction, award, decree or writ of any governmental body, entity or
authority against, or binding upon, it or any of its Affiliates or upon any of
its or their properties or the business of the Partnership or the Underlying
Partnership or (E) assuming all required consents of governmental bodies,
entities and authorities are obtained, violate any law, statute, code,
ordinance, regulation or other requirement of any governmental body, entity or
authority and (vii) there is no provision in the organizational documents of
such Partner that would prevent or limit, or is otherwise inconsistent with, the
conduct of the Partnership's business in accordance with this Agreement or the
business of the Underlying
<PAGE>
24
Partnership Agreement.
(b) Each of Opco GP and Oak Hill GP (i) warrants and represents
to the other Partners that it is a special purpose entity formed for the sole
purposes of becoming a general partner in the Partnership and engaging in the
activities contemplated by this Agreement and (ii) covenants that it shall not
engage in any other business.
(c) Each of the Partners represents that it is acquiring its
interest in the Partnership for investment and not with a view to the resale or
distribution thereof .
8. OHTE Subsidiaries; Capital Contributions.
----------------------------------------
8.1 Without limiting the Oak Hill Partners' rights under Article
14 hereof and under the other provisions of this Agreement, and notwithstanding
anything to the contrary contained in the Agreement (other than Section 14.7),
Oak Hill Parent shall have the right to assign that portion of its Partnership
Interest owned by it in its capacity as "OHTE" to an Affiliate of Oak Hill
Parent which is wholly-owned by one or more investors in Oak Hill Parent. In
addition, OHTE shall have the right, with respect to each Hotel Interest
acquired by the Underlying Partnership prior to the OHTE Initial Contribution
Date, to require that on or after the OHTE Initial Contribution Date a wholly
owned subsidiary of OHTE (an "OHTE Subsidiary") be admitted to the Partnership
---------------
as a Limited Partner with respect to such Hotel Interest (any such OHTE
Subsidiary, an "Initial OHTE Subsidiary"). If OHTE shall exercise such right,
-----------------------
then upon the admission of the Initial OHTE Subsidiaries to the Partnership,
OHTE shall withdraw as a Partner and shall no longer share in distributions of
Available Cash or in allocations of Partnership income, gain and loss (provided
that no such withdrawal shall affect OHTE's obligations under Section 8.2).
OHTE shall also have the right, prior to the acquisition of any Hotel Interest
by the Underlying Partnership after the OHTE Initial Contribution Date, to
require that a separate OHTE Subsidiary be admitted to the Partnership as an
additional Limited Partner with respect to such Hotel
<PAGE>
25
Interest. The OHTE Subsidiary admitted to the Partnership with respect to a
Hotel Interest shall be responsible, in accordance with the provisions of
Section 8.2, for making all OHTE Capital Contributions (as defined in Section
8.2) to the Partnership in respect of such Hotel Interest (including without
limitation, capital contributions required to fund the acquisition of such Hotel
Interest) and shall share in distributions of Available Cash, and in allocations
of Partnership income, gain and loss, only with respect to such Hotel Interest.
If OHTE shall designate Initial OHTE Subsidiaries but shall fail to designate an
OHTE Subsidiary in respect of any Hotel Interest acquired after the Initial OHTE
Contribution Date, OHTE shall be deemed to have designated, as such OHTE
Subsidiary, the OHTE Subsidiary most recently admitted to the Partnership. Upon
the admission of an OHTE Subsidiary to the Partnership, such OHTE Subsidiary
shall be deemed to have made, as to itself, the warranties and representations
contained in Section 7.1(a) and (b). The admission of any Initial OHTE
Subsidiary to the Partnership shall be deemed a partial assignment of OHTE's
interest in the Partnership and shall be subject to the requirements of Section
14.7 (it being understood that the admission of any other OHTE Subsidiary shall
not be deemed such an assignment, provided that any such OHTE Subsidiary shall
execute and deliver to the Partnership documentation of the nature referred to
in clauses (i) and (iii) of Section 14.7). Notwithstanding anything to the
contrary contained in the foregoing, OHTE may elect to form OHTE Subsidiaries
with respect to some Hotel Interests and not others and, in such event, the term
"OHTE Subsidiary," as used herein with respect to any Hotel Interest as to which
an OHTE Subsidiary was not formed, shall be deemed to mean OHTE itself (except
for purposes of Section 13.7 and any other provisions hereof relating to the
sale of stock in OHTE Subsidiaries).
8.2 (a) Each Partner is, on the date hereof, contributing to
the capital of the Partnership the amount shown under "Initial Capital
Contributions" on Exhibit A annexed hereto. If the Management Committee shall
---------
determine that additional funds in excess of those available through borrowings,
withdrawals from reserves or other sources are required by the Partnership or
the Underlying Partnership in order to fund activities authorized under this
Agreement or the Underlying Partnership Agreement, as applicable, the Management
Committee may give notice (a "Contribution Notice") to such effect to each
-------------------
Partner (or, in the case of the OHTE Subsidiaries, if any, to OHTE). The
Contribution Notice shall require that each Partner (other than the OHTE
Subsidiaries) make, and that OHTE cause the applicable OHTE Subsidiary or each
of the OHTE Subsidiaries to make, a contribution to the capital of the
Partnership in an amount equal to such Partner's Proportionate Share of the
total amount so required by the Partnership or of the Partnership's share of the
total amount so required by the Underlying Partnership (the capital
contributions for which OHTE is so responsible, the "OHTE Capital
------------
Contributions"). As used herein with respect to a Partner, the term
"Proportionate Share" shall mean: (i) in the case of each Partner other than an
-------------------
OHTE Subsidiary, a fraction, the numerator of which is such Partner's Commitment
and the denominator of which is the aggregate Commitments; and (ii) in the case
of an OHTE Subsidiary, the numerator of which is OHTE's Commitment and the
denominator of which is the
<PAGE>
26
aggregate Commitments. Notwithstanding the foregoing: (A) in the case of capital
contributions to be used to pay costs and expenses which are not allocable to a
particular Hotel Interest, each such capital contribution shall be deemed
allocated among the Hotel Interests then owned by the Underlying Partnership in
proportion to the other capital contributions associated with each such Hotel
Interest; (B) in no event shall the aggregate amount of funds required to be
contributed by any Partner (other than OHTE and the OHTE Subsidiaries, if any)
pursuant to this Section 8.2 exceed such Partner's Commitment; (C) in no event
shall the aggregate amount of funds required to be contributed by OHTE and any
OHTE Subsidiaries pursuant to this Section 8.2 exceed in the aggregate OHTE's
Commitment; and (D) in no event shall any Partner be required to contribute
funds to the Partnership after the Commitment Expiration Date for the purpose of
funding the acquisition of Hotel Interests by the Partnership. If a Contribution
Notice shall be given, then, unless such Contribution Notice relates solely to
cash needs of the Partnership (and not to the Partnership's share of the cash
needs of the Underlying Partnership), a corresponding capital call shall be made
to MHOP in its capacity as limited partner of the Underlying Partnership.
(b) The Partners shall be required to make contributions to
the capital of the Partnership pursuant to this Section 8.2 within fifteen (15)
days after the giving of a Contribution Notice. Each Contribution Notice shall
set forth the amount of funds the Management Committee has determined are to be
contributed to the Partnership and the purpose(s) for which such funds will be
used. No Contribution Notice shall require the Oak Hill Partners to contribute
(in the aggregate) less than $5,000,000 in capital to the Partnership. The
amount of capital required to be contributed to the Partnership pursuant to a
Contribution Notice may, to the extent necessary to comply with the preceding
sentence or as otherwise reasonably determined by the Management Committee in
light of the projected future cash needs of the Partnership and the timing of
such needs, exceed the amount needed by the Partnership to meet its then-current
cash needs and, to the extent of such excess, shall be invested in temporary
investments acceptable to the Management Committee and permitted under the terms
of the Credit Facility or any other third party agreement.
8.3 For purposes of this Section 8.3: (A) the term "Defaulting
----------
Partner" shall mean, collectively, (i) the Oak Hill Partners, if any of the Oak
- -------
Hill Partners (including Oak Hill Partners admitted to the Partnership after the
date hereof) shall fail to contribute all or any part of the funds which they
are called upon to contribute pursuant to Section 8.2, or (ii) the Opco
Partners, if any of the Opco Partners shall fail to contribute all or any part
of the funds which they are called upon to contribute pursuant to
<PAGE>
27
Section 8.2; (B) the term "Non-Defaulting Partner" shall mean, collectively, the
----------------------
Oak Hill Partners or the Opco Partners, whichever shall not be the Defaulting
Partner; and (C) the term "Requested Amount" shall mean the amount of the funds
----------------
which the Defaulting Partner was called upon or required to contribute or pay
and as to which it is, in whole or in part, in default. If any Partner shall
fail to contribute all or any part of the Requested Amount, the Non-Defaulting
Partner may, but shall not be obligated to, advance to the Partnership all or
any part of such Requested Amount. Any amount so advanced shall be deemed to be
a demand loan (a "Default Loan") to the Partner which failed to contribute the
------------
Requested Amount, which loan shall bear interest at an annual rate equal to the
lesser of (a) seven (7) percentage points in excess of the Prime Rate and (b)
the highest rate permitted by law, the proceeds of which loan shall be deemed to
have been used by such Partner to make Capital Contribution to the Partnership.
All of the Persons constituting the Defaulting Partner shall be jointly and
severally liable with respect to each Default Loan made to such Partner. Until
any Default Loans and the interest thereon shall be paid in full, all
distributions to which the Persons constituting the Defaulting Partner would
otherwise be entitled under this Agreement shall instead be paid to the Persons
constituting the Non-Defaulting Partner, and applied first to interest on, and
then to the principal balance of, the outstanding Default Loans (such payments
to be allocated between the Persons constituting the Non-Defaulting Partner in
proportion to the respective amounts of interest or principal, as applicable,
owing to each such Person); provided that for purposes of Articles 9 and 10 such
distributions shall be deemed to have been made to the Persons constituting the
Defaulting Partner. All Default Loans shall be prepayable in whole or in part
without penalty or premium; provided that any payments on account of Default
Loans shall be applied first against interest and then against principal. The
right of the Non-Defaulting Partner to make Default Loans pursuant to this
Section 8.3 shall be non-exclusive and the Non-Defaulting Partner and the
Partnership may, in respect of the Defaulting Partner's failure to advance all
or any portion of the Requested Amount, exercise all other remedies available to
them at law or in equity (it being agreed that the General Partner which is not
included in the Defaulting Partner shall have the sole right, without the
consent of any other Partner, to act on behalf of the Partnership in exercising
any such remedy).
8.4 The Partners shall not be liable for any of the debts,
liabilities or obligations of the Partnership or any of the losses thereof
beyond the amount of each of their respective capital contributions to the
Partnership, except to the extent otherwise required by law. No Partner shall be
responsible for any debts or losses of any other Partner.
<PAGE>
28
8.5 (A) If, after all contributions then required or permitted
to have been made under Sections 8.2 and 8.3 have been made, additional funds
are needed by the Partnership to pay cash needs of the Partnership (or to fund
loans made by the Partnership to pay cash needs of the Underlying Partnership
pursuant to Section 8.4 of the Underlying Partnership Agreement), then, subject
to the obtaining of any required consents from the lenders to the Underlying
Partnership or other third parties, the Partners may, but shall not be obligated
to, loan such funds to the Partnership in proportion to their respective
Proportionate Share or in such other proportion as they shall agree on. Such
loans ("Voluntary Loans") shall bear interest at an appropriate risk-adjusted
---------------
market rate, shall be repayable only out of available cash of the Partnership
(prior to any distributions provided for in this Agreement but after the payment
of Priority Loans) and shall be repaid to the Partners which made such loans,
together with accrued and unpaid interest thereon, in proportion to the
respective outstanding principal balance of such loans owed to each such
Partner. No dispute as to whether any interest rate is an appropriate risk-
adjusted market rate of interest shall affect the right of the Partnership to
accept any loan provided for in this Section 8.5 or to pay interest thereon at
the rate agreed to by the Partnership. In the event of a dispute as to the
appropriate risk-adjusted market rate of interest to be charged then, pending
the resolution of such dispute, interest at a per annum rate of the Prime Rate
plus 1% shall accrue (and, to the extent payments thereof are to be made
pursuant to this Section 8.5, shall be paid) on such loans from the date such
loans are made until the date any such dispute shall have been resolved. Upon
the determination as to the actual rate of interest to be charged, interest
shall be recalculated retroactively to the date such loans were made and the
applicable Partner or the Partnership, as the case may be, shall, within 15 days
after the determination of such actual rate of interest, pay to the other party
any excess interest paid to or by such party. If the parties are unable to
agree as to the rate of interest to be charged on any loans pursuant to this
Section 8.5, such dispute may, at the election of either Partner, be submitted
to arbitration under the Expedited Procedures provisions of the Commercial
Arbitration Rules of the American Arbitration Association or any successor. For
purposes of this Section 8.5, the term "cash needs" shall not include the cost
of acquiring Hotel Interests.
(B) If any Partner or any holder of direct or indirect
equity interests in any Partner shall make any payment under any Recourse
Indemnity (as hereinafter defined), then, unless the act or occurrence giving
rise to such payment is one as to which such Partner would not be entitled to
indemnification hereunder, the amount so paid shall, at such Partner's election,
be deemed a loan ("Priority Loan") to the Partnership, which Priority Loan shall
-------------
bear interest at an annual rate equal to the Prime
<PAGE>
29
Rate plus 1% and shall be repayable, together with such interest, only out of
Available Cash and prior to the repayment of any Voluntary Loans, the payment of
interest on Voluntary Loans and distributions to the Partners. All payments by
the Partnership on account of Priority Loans shall be applied first to interest
and then to principal. As used herein, the term "Recourse Indemnity" shall mean
------------------
any agreement to indemnify a lender to the Underlying Partnership with respect
to any so-called "non-recourse" carveouts in such lender's loan documents, or
any separate recourse indemnity or guaranty given to any such lender. The rights
of the Partners and their direct and indirect equity owners under this Section
8.5(B) shall be in addition to, and not in substitution for, those under Section
13.11 hereof.
(C) All Priority Loans and Voluntary Loans shall be
subordinate in all respects to the indebtedness evidenced by that certain Senior
Secured Credit Facility being entered into between the Underlying Partnership,
certain of its Operating Subsidiaries and Lehman Brothers Holdings Inc. (the
"Credit Facility") and to all renewals, extensions, modifications, assignments,
---------------
replacements or consolidations thereof and the rights, privileges and powers of
the lender thereunder.
8.6 Notwithstanding anything to the contrary contained in the
foregoing, if the General Partners elect to cause the Partnership to acquire
MHOP's interest in the Underlying Partnership with respect to a Hotel Interest
pursuant to Section 13.12 of the Underlying Partnership Agreement, then the cost
of such acquisition and any expenses incidental thereto shall be funded not out
of capital contributions to the Partnership but out of third-party borrowings,
Voluntary Loans or such other financing sources as the General Partners shall
agree on. The election to make such acquisition shall, notwithstanding anything
to the contrary contained in this Agreement, require the approval of both
General Partners.
8.7 Except as expressly provided in this Article 8, no Partner
shall be required or permitted to make any capital contributions or loans to the
Partnership.
8.8 (A) Notwithstanding anything to the contrary contained in
this Agreement, the Partners agree that, until the OHTE Initial Contribution
Date, the Partnership's share of all cash needs of the Underlying Partnership
(to the extent such cash needs are not funded out of borrowings of the
Underlying Partnership), as well as all other cash needs of the Partnership,
shall be funded through capital contributions by the Opco Partners. All such
capital contributions shall be made by the Opco Partners in
<PAGE>
30
proportion to their respective Proportionate Shares. The Partners further agree
that, subject to the Limited Partner's rights under clause (B) of this Section
8.8 and notwithstanding anything to the contrary set forth in Section 8.2, the
Oak Hill Partners (including any OHTE Subsidiary which is then a Partner) shall,
from and after the OHTE Initial Contribution Date, make 100% of all required
capital contributions to the Partnership (in proportion to their respective
Proportionate Shares) until their aggregate capital contributions and the
capital contributions theretofore made by the Opco Partners are in the same
proportion, one to the other, as the respective Commitments of the Oak Hill
Partners and the Opco Partners. Each such capital contribution shall, for
purposes of this Agreement, be deemed made with respect to the Hotel Interests
then owned by the Partnership in proportion to the respective total capital
contributions (whether made by the Opco Partners or the Oak Hill Partners) made
with respect to such Hotel Interests (including capital contributions made
pursuant to this Section 8.8(A)). Upon each such capital contribution, the
aggregate capital contributions theretofore made by the Opco Partners shall be
deemed reallocated among such Hotel Interests such that they equal, as to each
such Hotel Interest, the total capital contributed with respect to such Hotel
Interest (whether by the Opco Partners or the Oak Hill Partners) less the amount
----
of capital deemed contributed by the Oak Hill Partners with respect to such
Hotel Interest pursuant to the immediately preceding sentence.
(B) Notwithstanding the foregoing provisions of this
Section 8.8, Opco GP shall have the right, at any time on or after April 1,
1999, to give a Contribution Notice requiring the Oak Hill Partners to make
capital contributions to the Partnership on or after April 15, 1999 (in
proportion to their respective Proportionate Shares) in an amount such that
their aggregate capital contributions to the Partnership equal their aggregate
Proportionate Share of all capital contributions theretofore made to the
Partnership; provided that Opco GP shall use its reasonable efforts not to
require that such capital contributions be made prior to the earlier of (i) May
12, 1999 and (ii) the third closing of the acquisition of partnership interests
in Oak Hill Parent. The amount so contributed shall be distributed to the Opco
Partners (in proportion to their respective Proportionate Shares), shall be
treated as a reduction of their capital contributions (including for purposes of
calculating Overall Percentage Interest), and shall be treated, for purposes of
determining the extent to which the Opco Partners shall have funded their
respective Commitments, not to have been contributed to the Partnership. Upon
any such capital contribution, the respective capital contributions deemed made
by the Partners with respect to each Hotel Interest then owned by the
Partnership shall be reallocated so they stand in the same proportion, one to
the other, as the Partners' respective Proportionate Shares.
<PAGE>
31
8.9 Notwithstanding anything to the contrary contained in this
Agreement, Oak Hill LP, OHTE and OHCMP shall have the right, at any time on or
prior to the OHTE Initial Contribution Date (or thereafter, at the time of any
closing of the acquisition of partnership interests in Oak Hill Parent) to
increase or reduce their respective Commitments (provided that such Commitments
shall in all events equal $89,500,000 in the aggregate and OHCMP's Commitment
shall in no event exceed its Commitment on the date hereof). Oak Hill GP shall
notify Opco GP of the exercise of such right prior to the OHTE Initial
Contribution Date (or prior to any subsequent exercise of such right) and the
Partners shall promptly thereafter enter into an amendment to this Agreement,
reasonably satisfactory to the Partners, reflecting such reallocation of
Commitments and the resulting adjustment in Proportionate Shares. In the event
Capital Contributions have theretofore been made by the Oak Hill Partners, then
additional Capital Contributions shall be made by, and corresponding
distributions made to, Oak Hill LP, OHCMP and OHTE (or, if OHTE Subsidiaries
have been admitted to the Partnership, such OHTE Subsidiaries) in a manner
consistent with that described in Section 8.8(B) in order to give effect to
such reallocation. Notwithstanding the foregoing, no such reallocation shall be
effected unless all necessary consents thereto, if any, shall have been obtained
from lenders to the Partnership or the Underlying Partnership or other third
parties.
8.10 The Partners agree that, notwithstanding anything to the
contrary contained in this Agreement, a Contribution Notice shall in all events
be given in the event the Partnership requires additional cash in order to pay
base rent under the Operating Leases. Nothing in the foregoing shall require
that any Partner make aggregate contributions in excess of its Commitment.
9. Capital Accounts; Allocations.
-----------------------------
9.1 A separate Capital Account shall be maintained for each
Partner. Each Partner's Capital Account shall be credited with the amount of
such Partner's capital contributions made in cash and the fair market value (net
of liabilities assumed or taken subject to) of all property contributed by such
Partner and such Partner's allocated share of Gross Profit and Net Profit of the
Partnership. Each Partner's Capital Account shall be debited with the amount of
any cash distributions to such Partner and the fair market value (net of
liabilities assumed or taken subject to) of all property distributed in kind to
such Partner and such Partner's allocated share of Net Loss of the Partnership.
In the event that any Partnership Interest or portion thereof is
<PAGE>
32
transferred in accordance with the terms of this Agreement, the transferee of
such Partnership Interest or portion thereof shall succeed to the transferor's
Capital Account (or that percentage of the transferor's Capital Account as is
equal to the percentage of the transferor's Partnership Interest so
transferred).
9.2 Except as otherwise provided in the further provisions of
this Article 9, Net Profit and Net Loss of the Partnership for any Fiscal Year
shall be allocated as follows and in the following order of priority:
9.2.1 Any Net Profit of the Partnership for any Fiscal Year
shall be allocated as follows and in the following order of priority:
(i) First, to the Partners in proportion to and to
the extent of the excess, if any, of (A) the aggregate amount of Net Loss
previously allocated to each such Partner pursuant to Section 9.2.2(ii) for
all prior years over (B) the aggregate amount of Net Profit previously
allocated to such Partner pursuant to this clause (i) for all prior years;
and
(ii) Thereafter, to the Partners in such amounts so
that their respective Adjusted Capital Account balances are proportionate
to the respective aggregate distribution to which each Partner is entitled
pursuant to Section 10.1.
9.2.2 Any Net Loss of the Partnership for any Fiscal Year
shall be allocated as follows and in the following order of priority:
(i) First, to the Partners in such amounts so that
their respective Adjusted Capital Account balances are proportionate to the
respective aggregate distribution to which each Partner is entitled
pursuant to Section 10.1, until such Adjusted Capital Account balances are
reduced to zero; and
(ii) Second, to the Partners in proportion to their
Overall Percentage Interests.
9.3 Notwithstanding the foregoing, to the extent any allocation
of Net Loss pursuant to Section 9.2.2 would reduce any Limited Partner's
Adjusted Capital Account below zero and any other Partner has a positive
Adjusted Capital
<PAGE>
33
Account balance, such Net Loss shall instead be allocated among the General
Partners and the other Limited Partners whose Adjusted Capital Accounts would
not thereby be reduced below zero, and subsequent allocations of Net Profit
shall thereafter be made, prior to any other allocations of Net Profit, to the
General Partners and such other Limited Partners in proportion to and to the
extent of such excess Net Loss allocation. If all of the Partners' Adjusted
Capital Account balances are equal to or below zero, then allocations of Net
Loss shall be determined pursuant to subsection 9.2.2.
9.4 In the event of a transfer of an interest in the
Partnership, or a change in the Overall Percentage Interests, the Partnership's
Net Profit or Net Loss shall be allocated among the Partners for the periods
before and after the transfer or change based on an interim closing of the books
or as the Partners may otherwise agree.
9.5 Except as otherwise provided in Section 9.6, all items of
Partnership income, gain, deduction and loss for tax purposes shall be allocated
among the Partners in the same proportion as they share in the Gross Profit, Net
Profit and Net Loss to which such items relate.
9.6 Income, gain, loss or deductions of the Partnership shall,
solely for income tax purposes, be allocated among the Partners in accordance
with Section 704(c) of the Code and the Treasury Regulations promulgated
thereunder, so as to take account of any difference between the adjusted tax
basis of the assets of the Partnership and their respective Gross Asset Values
in accordance with the traditional method set forth in (S) 1.704-3(b) of the
Treasury Regulations or such other methods as the Partners may agree on.
9.7 Notwithstanding any other provision of this Article 9, if
there is a net decrease in Partnership Minimum Gain during any year, each
Partner shall be specially allocated items of Gross Profit for such year (and,
if necessary, subsequent years) in an amount equal to the portion of such
Partner's share of the net decrease in Partnership Minimum Gain, determined in
accordance with (S) 1.704-2(g) of the Treasury Regulations. Allocations pursuant
to the previous sentence shall be made in proportion to the respective amounts
required to be allocated to each Partner pursuant thereto. The items to be so
allocated shall be determined in accordance with (S) 1.704-2(f)(6) of the
Treasury Regulations. This Section 9.7 is intended to comply with the minimum
gain chargeback requirement in (S) 1.704-2(f) of the Treasury Regulations and
shall be interpreted consistently therewith.
<PAGE>
34
9.8 Notwithstanding any other provisions of this Article 9
except Section 9.7, if there is a net decrease in Partner Minimum Gain
attributable to a Partner Nonrecourse Debt during any year, each Partner who has
a share of the Partner Minimum Gain attributable to such Partner Nonrecourse
Debt, determined in accordance with (S) 1.704-2(i)(5) of the Treasury
Regulations, shall be specially allocated items of Gross Profit for such year
(and, if necessary, subsequent years) in an amount equal to the portion of such
Partner's share of the net decrease in Partner Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with (S) 1.704-2(i)(4) of the
Treasury Regulations. Allocations pursuant to the previous sentence shall be
made in proportion to the respective amounts required to be allocated to each
Partner pursuant thereto. The items to be so allocated shall be determined in
accordance with (S) 1.704-2(i)(4) of the Treasury Regulations. This Section 9.8
is intended to comply with the minimum gain chargeback requirement in (S) 1.704-
2(i) of the Treasury Regulations and shall be interpreted consistently
therewith.
9.9 Nonrecourse Deductions for any year shall be allocated as
Net Loss pursuant to Section 9.2.
9.10 Any Partner Nonrecourse Deductions for any year shall be
specially allocated to the Partner who bears the economic risk of loss with
respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse
Deductions are attributable in accordance with (S) 1.704-2(i)(1) of the Treasury
Regulations.
9.11 If a Limited Partner unexpectedly receives an adjustment,
allocation or distribution described in (S) 1.704-1(b)(2)(ii)(d) of the Treasury
Regulations which, after taking into account all other allocations to be made
for such year pursuant to this Article 9, creates or increases a deficit balance
in such Partner's Adjusted Capital Account (computed after all other allocations
to be made for such year pursuant to this Article 9 have been tentatively made
as if this Section 9.11 were not in this Agreement), such Deficit Partner shall
be allocated items of Gross Profit in an amount equal to such deficit balance.
This Section 9.11 is intended to comply with the qualified income offset
requirement of (S) 1.704-1(b)(2)(ii)(d) of the Treasury Regulations and shall be
interpreted consistently therewith.
9.12 The allocations set forth in Sections 9.7 through 9.11 (the
"Regulatory Allocations") shall be taken into account in allocating items of
----------------------
income, gain, loss and deduction among the Partners so that, to the extent
possible, the net amount of such allocations of other items and the Regulatory
Allocations to each Partner shall be
<PAGE>
35
equal to the net amount that would have been allocated to each such Partner if
the Regulatory Allocations had not occurred.
10. Distributions; Use of Partnership Funds.
---------------------------------------
10.1 Subject to the further provisions of this Article 10,
distributions of Partnership cash or other property shall be made to the
Partners, in such amounts and at such times as the Management Committee shall
determine, as follows:
10.1.1 Available Cash other than Capital Proceeds shall
be distributed to the Partners, in proportion to their respective Overall
Percentage Interests.
10.1.2 Prior to the fourth anniversary of the date
hereof, Available Cash consisting of Capital Proceeds shall be distributed as
follows:
(i) First, for computational purposes, the aggregate
amount to be distributed shall be divided among Opco GP, Opco LP and the Oak
Hill Partners, in the aggregate, in proportion to their respective Overall
Percentage Interests, and the amounts so apportioned to Opco GP and Opco LP
shall be distributed to them; and
(ii) Second, the aggregate amount so apportioned to the Oak
Hill Partners shall be distributed as follows and in the following order of
priority:
(a) First, 100% to the Oak Hill Partners, until
they have achieved an IRR of 20%;
(b) Second, 100% to Opco LP, until it has
received aggregate distributions pursuant to this Section 10.1.2(ii) equal
to 1% of the aggregate distributions to all Oak Hill Partners pursuant to
Section 10.1.1 and to all Partners pursuant to this Section 10.1.2(ii);
(c) Third, 1% to Opco LP and 99% to the Oak Hill
Partners, until the Oak Hill Partners have achieved an IRR of 25%;
(d) Fourth, 100% to Opco LP, until it has
received aggregate distributions pursuant to this Section 10.1.2(ii) equal
to 2% of the aggregate distributions to all Oak Hill Partners pursuant to
Section 10.1.1 and to
<PAGE>
36
all Partners pursuant to this Section 10.1.2(ii);
(e) Fifth, 2% to Opco LP and 98% to the Oak Hill
Partners, until the Oak Hill Partners have achieved an IRR of 30%;
(f) Sixth, 100% to Opco LP, until it has received
aggregate distributions pursuant to this Section 10.1.2(ii) equal to 3% of
the aggregate distributions to all Oak Hill Partners pursuant to Section
10.1.1 and to all Partners pursuant to this Section 10.1.2(ii);
(g) Seventh, 3% to Opco LP and 97% to the Oak
Hill Partners, until the Oak Hill Partners have achieved an IRR of 35%;
(h) Eighth, 100% to Opco LP, until it has
received aggregate distributions pursuant to this Section 10.1.2(ii) equal
to 4% of the aggregate distributions to all Oak Hill Partners pursuant to
Section 10.1.1 and to all Partners pursuant to this Section 10.1.2(ii);
(i) Ninth, 4% to Opco LP and 96% to the Oak Hill
Partners, until the Oak Hill Partners have achieved an IRR of 40%;
(j) Tenth, 100% to Opco LP, until it has received
aggregate distributions pursuant to this Section 10.1.2(ii) equal to 5% of
the aggregate distributions to all Oak Hill Partners pursuant to Section
10.1.1 and to all Partners pursuant to this Section 10.2.1(ii); and
(k) Thereafter, 5% to Opco LP and 95% to the Oak
Hill Partners.
Exhibit E annexed hereto sets forth an example of how the foregoing distribution
formula shall be applied.
10.1.3. On and after the fourth anniversary of the date
hereof, Available Cash consisting of Capital Proceeds shall be distributed as
follows:
(i) First, for computational purposes, the aggregate amount
to be distributed shall be divided among the Opco GP, the Opco LP and the Oak
Hill Partners, in the aggregate, in proportion to their respective Overall
Percentage Interests,
<PAGE>
37
and the amounts so apportioned to the Opco GP and the Opco LP shall be
distributed to them; and
(ii) Second, the aggregate amount so apportioned to the Oak
Hill Partners shall be distributed as follows and in the following order of
priority:
(a) First, 100% to the Oak Hill Partners, until they
have achieved an IRR of 20%;
(b) Second, 100% to Opco LP, until it has received
aggregate distributions pursuant to Section 10.1.2(ii) and this Section
10.1.3(ii) equal to 2% of the aggregate distributions to all Oak Hill
Partners pursuant to Section 10.1.1 and to all Partners pursuant to Section
10.1.2(ii) and this Section 10.1.3(ii);
(c) Third, 2% to Opco LP and 98% to the Oak Hill
Partners, until the Oak Hill Partners have achieved an IRR of 25%;
(d) Fourth, 100% to Opco LP, until it has received
aggregate distributions pursuant to Section 10.1.2(ii) and this Section
10.1.3(ii) equal to 4% of the aggregate distributions to all Oak Hill
Partners pursuant to Section 10.1.1 and to all Partners pursuant to Section
10.1.2(ii) and this Section 10.1.3(ii);
(e) Fifth, 4% to Opco LP and 96% to the Oak Hill
Partners, until the Oak Hill Partners have achieved an IRR of 27.5%;
(f) Sixth, 100% to Opco LP, until it has received
aggregate distributions pursuant to Section 10.1.2(ii) and this Section
10.1.3(ii) equal to 5% of the aggregate distributions to all Oak Hill
Partners pursuant to Section 10.1.1 and to all Partners pursuant to Section
10.1.2(ii) and this Section 10.1.3(ii);
(g) Seventh, 5% to Opco LP and 95% to the Oak Hill
Partners, until the Oak Hill Partners have achieved an IRR of 30%;
(h) Eighth, 100% to Opco LP, until it has received
aggregate distributions pursuant to Section 10.1.2(ii) and this Section
10.1.3(ii) equal to 7% of the aggregate distributions to all Oak Hill
Partners pursuant to
<PAGE>
38
Section 10.1.1 and to all Partners pursuant to Section 10.1.2(ii) and this
Section 10.1.3(ii); and
(i) Thereafter, 7% to Opco LP and 93% to the Oak Hill
Partners.
10.1.4. For purposes of Sections 10.1.2 and 10.1.3,
amounts to be distributed to the Oak Hill Partners shall be apportioned among
them as the Oak Hill GP shall determine, and the Oak Hill GP shall inform the
Partnership of the amount of each distribution to be made to each Oak Hill
Partner; provided, however, that any such apportionment among the Oak Hill
Partners must satisfy the "substantial economic effect" requirement of the
Treasury Regulations.
10.2 (i) Notwithstanding the foregoing distribution provisions
of this Article 10, if, with respect to any Partner(s) as of any quarterly
period, (A) the product of (I) the cumulative amount of net taxable income
allocated to such Partner(s) pursuant to this Agreement for the current Fiscal
Year (or portion thereof) that includes such quarter and all prior Fiscal Years
multiplied by (II) the Effective Tax Rate, exceeds (B) the aggregate amount
distributed or to be distributed to such Partner(s) during such Fiscal Year (or
portion thereof) ending on with such quarter and all prior Fiscal Years pursuant
to the other provisions of this Article 10, the Partnership may, at the election
of the Management Committee, elect to make an advance ("Tax Advance") to all
-----------
such Partner(s) in an amount up to the aggregate excess tax liability of the
Partner(s) in proportion to their respective shares of such excess tax
liability. It is expected that any such Tax Advances would be made at such
times as may be appropriate to permit the Partners to make their required
estimated tax payments.
(ii) All Tax Advances made on behalf of a Partner shall be
repaid to the Partnership by reducing the amount of the next succeeding
distribution or distributions that would otherwise have been made to such
Partner, or, if such distributions are not sufficient for that purpose, by so
reducing the proceeds of liquidation otherwise payable to such Partner.
10.3 In no event shall the Partnership be required to distribute
Partnership cash pursuant to Sections 10.1 and 10.2 to the extent that, in the
reasonable judgment of the Management Committee, such cash is needed to meet
cash needs of the Partnership or the Underlying Partnership (the Partners hereby
agreeing that the cost of acquiring any Hotel Interest shall not be deemed a
cash need for this purpose) or to meet
<PAGE>
39
(or to reserve for) any liabilities or obligations of the Partnership
(including, without limitation, contingent liabilities or obligations to the
extent then known by the Management Committee and as reasonably estimated by the
Management Committee).
10.4 Notwithstanding anything to the contrary contained in
Section 10.1, (i) distributions of Partnership cash, to the extent paid out of
distributions by the Underlying Partnership, shall be made to the Partners
within one business day after the corresponding distributions are received by
the Partnership from the Underlying Partnership and (ii) other distributions
shall be made at least quarterly (in the case of distributions of operating cash
flow) or within 30 days after the event generating the cash to be distributed
(in the case of distributions of Capital Proceeds). The parties agree that the
Partnership, as the general partner of the Underlying Partnership, shall cause
cash of the Underlying Partnership to be distributed in accordance with Sections
9.12, 9.13 and 9.14, and the other relevant provisions, of the Underlying
Partnership Agreement.
10.5 For purposes of determining the amount of any distributions
or payments made in kind, marketable securities shall be valued based on the
average trading price of the securities over the 30-day period preceding the
later of the date of such distribution or payment and the termination of any
underwriter lock-up applicable to such securities, and non-marketable securities
shall be valued as determined by the General Partners in their reasonable
discretion. In the event that any security to be distributed in kind is to be
valued based on the trading value of such security after the distribution date
of such security under this Agreement, then the General Partners shall determine
whether or not an interim distribution of such securities shall be made to the
Partners on such distribution date based on the value of such security prior to
such distribution date, and if so, whether a portion of such interim
distribution shall be held in escrow pending any adjustment in the relative
distributions to the Partners based on trading values after such distribution
date or whether any such adjustment shall be settled among the parties by
applying such adjustment against future distributions or otherwise.
11. Books and Records; Tax Matters.
------------------------------
11.1 At all times during the continuance of the Partnership, Opco
GP shall keep or cause to be kept full and complete books of account in which
shall be entered fully and accurately each transaction of the Partnership and
the Underlying Partnership. All such books of account shall at all times be
maintained at the principal office of the Partnership and shall be open to the
inspection and examination of the Partners and their representatives on
reasonable advance notice during normal business
<PAGE>
40
hours. Such books shall be kept on the accrual basis and on the basis of an
accounting period consisting of a Fiscal Year.
11.2 The books of the Partnership and the Underlying Partnership
shall be closed and balanced at the end of each Fiscal Year, and not later than
April 1 of the following year, Opco GP shall furnish and distribute financial
statements to OPCO LP, Oak Hill GP, Oak Hill LP, OHCMP and OHTE which shall
reflect or include the results of the operations of the Partnership and the
Underlying Partnership for such year, the unpaid balance due on all obligations
of the Partnership and the Underlying Partnership, each Partner's share of the
net profits or net losses of the Partnership, and the Partnership's share of the
net profits or net losses of the Underlying Partnership, for financial
accounting purposes, each Partner's distributive share of all tax items of the
Partnership, an income and expense statement with respect to each Hotel Interest
owned by the Underlying Partnership, a statement of Capital Improvements made
with respect to each such Hotel Interest, all other relevant information for
federal income tax purposes and for the purposes of any state and local taxes
applicable to any Partner, and any other information customarily reflected in
financial statements prepared in accordance with GAAP. Such statements shall be
audited in accordance with generally accepted auditing standards by the
independent certified public accountants then regularly retained by the
Partnership or the Underlying Partnership, as applicable, and adjusted, to the
extent necessary, to make them conform to GAAP. Opco GP shall also be
responsible for causing the Partnership to deliver to the partners of the
Underlying Partnership, in a timely manner, all financial statements required to
be delivered to such Persons under the Underlying Partnership Agreement.
11.3 Opco GP shall cause to be prepared from the books of the
Partnership, and shall send OPCO LP, Oak Hill GP, Oak Hill LP, OHCMP and OHTE
within 20 days after the close of each calendar month, (a) Monthly Reports (as
defined in the Form of Management Agreement annexed hereto as Exhibit B) for
---------
each Hotel owned by the Underlying Partnership and (b) an income and expense
statement with respect to each other Hotel Interest owned by the Underlying
Partnership.
11.4 The Partners and their representatives shall have the right
to inspect, examine and copy all books, records, files and other documents of
the Partnership and the Underlying Partnership (including, without limitation,
those maintained for the Underlying Partnership by its managing agent or agents)
at all reasonable times during normal business hours at the offices of the
Partnership or at such other place(s) as any of the same may then be regularly
maintained (it being agreed that at
<PAGE>
41
least one set of books of accounts of the Partnership and the Underlying
Partnership shall be maintained at the principal office of the Partnership as
provided in Section 11.1).
11.5 It is agreed that the Partnership will retain as the
independent certified public accountants for the Partnership and the Underlying
Partnership a "Big Five" accounting firm until and unless the General Partners
otherwise determine.
11.6 Federal, state and local income tax returns of the
Partnership and the Underlying Partnership shall be prepared or caused to be
prepared by Opco GP and reviewed by the independent certified public accountants
then regularly retained by the Partnership or the Underlying Partnership.
Copies of all such tax returns shall be furnished to OPCO LP, Oak Hill GP, Oak
Hill LP, OHCMP and OHTE within 90 days after the close of each Fiscal Year and
shall be subject to the approval of Oak Hill GP and OHTE. Oak Hill GP and OHTE
shall endeavor to approve or disapprove any such return within 30 days after the
same is so furnished to it. Opco GP shall be responsible for requesting any
requisite extensions of the statutory dates for filing of the tax returns of the
Partnership or the Underlying Partnership. Notwithstanding the foregoing, in no
event shall Opco GP be responsible for the failure to timely prepare or cause to
be prepared and filed such returns if such failure is attributable to the
failure of the Partnership's (or the Underlying Partnership's) independent
certified public accountants to perform in a timely manner the services in
connection with such tax returns which they were engaged to perform or if such
failure is due to Oak Hill GP's or OHTE's failure timely to approve such return.
The income and deductions of the Partnership shall be reported for tax purposes
under the accrual method of accounting. Material tax decisions and elections for
the Partnership not expressly provided for in this Agreement shall be determined
by the Management Committee.
11.7 Opco GP shall, subject to clause (a) of Section 15.5, be
the "tax matters partner" pursuant to Section 6231(a)(7) of the Code and the
-------------------
Treasury Regulations promulgated thereunder. Except as otherwise required by
law, the "tax matters partner" shall not take any action whatsoever as "tax
matters partner" unless such action shall have been approved by Oak Hill GP and
OHTE. This Section 11.7 shall survive any termination of this Agreement.
12. Bank Accounts. All funds of the Partnership and the Underlying
-------------
Partnership shall be deposited in the name of the Partnership in one or more
bank accounts at one or more banking institutions designated by Opco GP and
reasonably
<PAGE>
42
acceptable to the Management Committee. All such funds shall be and remain the
property of the Partnership or the Underlying Partnership, as applicable.
Withdrawals from any such bank account or accounts shall be made only for the
purposes specified in or authorized by this Agreement. All such withdrawals
shall, subject to the provisions of the Management Agreements, be made upon such
signature or signatures as the Management Committee may designate. No funds of
the Partnership or the Underlying Partnership shall be commingled with funds of
any other Person.
13. Management and Powers; Rights, Duties and Obligations of
--------------------------------------------------------
Partners.
- --------
13.1 Subject to the further provisions of this Article 13, the
management and control of the Partnership's business shall be vested in a
management committee (the "Management Committee") which shall consist of seven
--------------------
(7) representatives (each, a "Representative" and, collectively, the
--------------
"Representatives"). Three (3) Representatives shall be appointed by Oak Hill GP
- ----------------
(the "Oak Hill Representative") one (1) Representative shall be appointed by
------------------------
OHTE (the "OHTE Representative") and three (3) Representatives shall be
-------------------
appointed by Opco GP. Each of Oak Hill GP, Opco GP and OHTE shall have the
right to remove and replace its Representatives from time to time. If any
Representative shall resign, the party who initially appointed such
Representative may appoint a substitute Representative. Any action to be taken
by or with the consent or approval of the Management Committee pursuant to the
terms of this Agreement and any determination to be made by the Management
Committee pursuant to the terms of this Agreement, shall require the consent of
a majority in number of the Representatives present at the meeting at which such
action is considered and at which a quorum is present as provided in the last
sentence of Section 13.4(a). So long as MHOP, a successor to MHOP by merger,
consolidation, sale of all or substantially all of its assets (the "OHTE
----
Representative") or similar transaction (a "MHOP Successor") or an Affiliate of
- -------------- --------------
MHOP or an MHOP Subsidiary is the limited partner of the Underlying
Partnership, such limited partner shall be given the right to have an observer
present at all meetings of the Management Committee and to receive all materials
presented to members of the Management Committee. If the Management Committee
approves any action, a written consent to such action executed by either General
Partner shall, with respect to Persons dealing with the Partnership, be
conclusive evidence of such approval.
13.2 Opco GP shall be responsible for conducting, and shall
(subject to the other provisions of this Agreement) have the authority to
conduct, the ordinary and usual business and affairs of the Partnership
(including its activities as the
<PAGE>
43
general partner of the Underlying Partnership), and shall devote such time and
render such services to the Partnership as is necessary in order to conduct such
business and affairs in an efficient manner. Without limiting the generality of
the foregoing (i) Opco GP shall have the authority to, and shall, perform, or
caused to be performed by the managing agent of each Hotel in which the
Underlying Partnership has an interest, all services it is the obligation of
such managing agent to perform under the applicable management agreement (Opco
GP's authority to perform (or cause to be performed) such services to be
subject, however, to the Management Committee's consent or approval to the
extent (and only to the extent) such consent or approval is required by the
provisions of this Agreement, including, without limitation, Sections 13.6 and
13.8 hereof) and (ii) in exercising the foregoing duties and performing the
foregoing services, Opco GP shall at all times conform to any policies or
programs approved by the Management Committee, and (notwithstanding any other
provision hereof) shall at all times comply with all directions, instructions
and requests of the Management Committee that are within the scope of the
Management Committee's authority under clause (i) of this Section 13.2 and the
other provisions of this Agreement. Subject to the further provisions of this
Article 13 (including, without limitation, Section 13.10), Opco GP may employ,
on behalf of the Partnership and the Underlying Partnership, such Persons as it,
in its judgment, shall deem advisable in the operation and management of the
business of the Partnership, including, without limitation, architects,
engineers, appraisers and experts, on such terms and for such compensation as
Opco GP, in its discretion, shall determine.
13.3 Each of the General Partners shall have the authority to
take any action, or execute any document or instrument of any type, on behalf or
in the name of the Partnership; provided, however, that each General Partner's
authority to take any such action or execute any such document or instrument is
only effective to the extent such action or execution is within the scope of
such General Partner's authority pursuant to the provisions of this Agreement.
Any Person dealing with the Partnership shall be entitled, without having to
undertake any investigation of the applicable facts, circumstances or provisions
of this Agreement, to rely on any instrument or document signed by either
General Partner, and the signature of no other Partner shall be required to make
any such instrument or document binding on the Partnership. Opco GP shall have
the authority, with the approval of the Management Committee, to appoint
officers of the Partnership and the Underlying Partnership to act in such
capacities as the Opco GP may from time to time determine.
13.4 (a) The Management Committee shall meet on a regular basis,
not less frequently than quarterly, to review the operations of the
<PAGE>
44
Partnership and to consider other matters which, pursuant to the provisions of
this Agreement, are to be submitted to the Management Committee or the General
Partners for their approval or consideration. One of such regular meetings each
year shall be held on or before December 1 of such year for the purpose of
reviewing the proposed budgets (both operating and Capital Improvement) for each
Hotel owned by the Underlying Partnership submitted by the managing agent of
such Hotel pursuant to the management agreement between the Underlying
Partnership or its subsidiary (as owner of such Hotel) or the Partnership (as
operating lessee of such Hotel), as the case may be, and such managing agent
covering such Hotel. Unless otherwise agreed, the foregoing meetings shall be
held at the principal office of the Partnership. All meetings of the Management
Committee shall require the attendance of (i) at least one Representative
appointed by Opco GP and at least one Representative appointed by each of Oak
Hill GP and OHTE and (ii) Representatives the majority of which are Oak Hill
Representatives and/or the OHTE Representative.
(b) Any Partner shall have the right from time to time to
call a special meeting of the Partners on not less than 10 days' prior written
notice to the other such Partners. Any General Partner or OHTE shall have the
right from time to time to call a special meeting of the Management Committee on
not less than 10 days' prior written notice to the Representatives. Any such
notice shall set forth the purpose of such meeting and an agenda in respect of
the same. Unless otherwise agreed upon, each special meeting shall be held at a
location in Washington, D.C. or New York City, or in the vicinity of either such
city, designated by Oak Hill GP.
(c) The Representatives or the Partners, as applicable, may
participate in any above-described meeting by conference telephone or similar
communications equipment.
(d) The Management Committee shall cause to be kept a book
of minutes of all above-described meetings in which there shall be recorded the
time and place of such meeting, whether regular or special (and if special, how
called), the notice thereof given, the names of those present, and the
proceedings thereof. Such minutes shall be kept at the principal place of
business of the Partnership and a copy shall be delivered to each Partner
promptly following each meeting.
13.5 (a) Supplementing Section 13.2, but without limiting the
generality of said Section, Opco GP shall cause to be prepared and submitted to
the Partners with respect to each Hotel Interest owned by the Underlying
Partnership the
<PAGE>
45
budgets (both operating and Capital Improvement), cash flow forecasts, marketing
plans and other reports and projections required to be prepared and submitted to
the Partnership by the managing agent of such Hotel pursuant to its management
agreement with the Partnership. Each such submission shall be made within the
time period provided for in the applicable Management Agreement or within 5
business days after the expiration of the time period provided for in the
applicable management agreement, if such agreement is not a Management
Agreement. The rights and powers of Opco GP and Oak Hill GP with respect to each
Management Agreement and each other management agreement covering a Hotel are
set forth in Section 13.8.
(b) Opco GP shall be responsible for locating and proposing to
the Partners Hotels for possible purchase by the Underlying Partnership (and
shall actively seek out and pursue such acquisition opportunities), negotiating
the terms of purchase therefor and furnishing to the Partners such information
as any Partner shall request in respect of the operation and physical condition
of each Hotel so proposed. Opco GP shall prepare or cause to be prepared with
respect to any Hotel the purchase of which is then being considered by the
Underlying Partnership, and shall submit to the Partners, budgets, schedules and
plans of the nature referred to in the form of Management Agreement attached
hereto as Exhibit B for the remainder of the then current Fiscal Year (and, if
--------
such consideration takes place during the last quarter of such Fiscal Year, for
the next ensuing Fiscal Year), and, if any Partner so requests, a plan for
making renovations and other Capital Improvements to such Hotel. All of such
items shall be subject to the Management Committee's approval. Opco GP shall, in
the performance of the foregoing acts, in all events comply with any directions
or instructions of the Management Committee. Nothing in this Section 13.5(b)
shall prevent any other Partner from proposing to the Partnership the
acquisition of one or more Hotels, Opco GP hereby agreeing that it shall, if so
directed by Oak Hill GP, prepare and submit to the Partners the items referred
to above with respect to any such Hotel(s). The provisions of this Section
13.5(b) shall apply with equal force to Hotel Equity Interests (and the
underlying Hotels in connection therewith) and to Hotel Debt (and the Hotels
that serve as security therefor). Notwithstanding anything to the contrary
contained herein, (i) all decisions regarding the acquisition of any Hotel
Interest by the Underlying Partnership shall require the approval of both
General Partners and (ii) in no event shall the Partnership acquire any Hotel
Interest if, in the judgment of either General Partner, such acquisition would
cause the Partnership to be an "investment company," as such term is defined in
------------------
the Investment Company Act of 1940.
(c) The General Partners shall cooperate in locating
<PAGE>
46
sources of, and negotiating the terms of, the financing (including the
refinancing) of Hotel acquisitions and operations. Notwithstanding anything to
the contrary contained herein, all decisions regarding the financing and
refinancing of Hotel Interests and other borrowings of the Partnership or the
Underlying Partnership shall be made by the Management Committee; provided,
however, that in no event shall any Opco Partner or any Affiliate of an Opco
Partner be required to give any guaranty or indemnification, or otherwise incur
any recourse liability, with respect to any such financing or refinancing
(except, in the case of the Opco Partners and MHR, to the extent of liability
comparable to that incurred by such Persons under the Credit Facility, but only
so long as an Affiliate of MHR is the managing agent of the Hotels owned by the
Underlying Partnership).
(d) Without limiting the generality of any other provision
hereof, including, without limitation, Section 13.1, but subject to the
provisions of Section 13.7, (i) the Oak Hill General Partner shall have the
right, without the consent of any Opco Partner but subject to the provisions of
the Underlying Partnership Agreement, to require that any Hotel Interest be sold
by the Underlying Partnership, (ii) each Partner shall cooperate with all
efforts of the Underlying Partnership to purchase, sell, finance or refinance a
Hotel Interest, such cooperation to include, without limitation, making the
applicable Hotel, and the books and records pertaining thereto, available to
prospective purchasers or lenders, furnishing such purchasers or lenders with
all information they may request in respect of such Hotel and furnishing such
information as is necessary in order that the Partnership (on behalf of itself
or in its capacity as general partner of the Underlying Partnership) may give
such representations and warranties as are customary in comparable transactions
and (iii) each General Partner shall (but only in its capacity as a general
partner of the Partnership) execute the contract of sale or other agreement(s)
required to be executed in connection with a sale of a Hotel Interest approved
or required by the Oak Hill General Partner. Notwithstanding the foregoing, no
Opco Partner, nor any Affiliate thereof, shall be required to give any
warranties or representations in connection with the sale of a Hotel Interest,
or with respect to any matter relating thereto, unless the same is customary and
reasonable and (except in the case of warranties or representations
(collectively, "Internal Representations" relating solely to its own internal
------------------------
organization, its due authorization of documents and other matters relating to
itself (as opposed for the Partnership, the Underlying Partnership, the Hotel
Interests and the Operating Subsidiaries)) unless the same is also given by an
Oak Hill Partner (or an Affiliate thereof), of comparable or greater
creditworthiness. The provisions of the immediately preceding sentence shall
also be applicable to any joint sale of Partnership Interests, or of interests
in an Operating Subsidiary (and/or stock in an OHTE Subsidiary), effected
pursuant to any provision of
<PAGE>
47
this Agreement.
(e) Opco GP shall, at the request of the Management
Committee and in connection with any proposed renovation of, or other Capital
Improvement to, any Hotel in which the Underlying Partnership has an interest,
prepare (or cause to be prepared), for approval by the Management Committee,
Capital Improvement budgets, plans and specifications (such plans and
specifications to be prepared by an architect and/or an engineer approved by the
Management Committee), provided that no such approval shall be required with
respect to the plans, specifications, architect and/or engineer with respect to
renovations or Other Capital Improvements having, in each case, a cost less than
$100,000 ("Minor Capital Improvements").
--------------------------
13.6 Supplementing Section 13.1, but without limiting the
generality of said Section, neither the Partnership, whether acting on behalf of
itself or in its capacity as general partner of the Underlying Partnership, nor
the Underlying Partnership (which term shall, for purposes of this Section 13.6,
include any managing agent acting on behalf of the Underlying Partnership)
shall, without the approval of the Management Committee, do any of the following
(and the Management Committee shall, subject to the further provisions of this
Section 13.6 and the other provisions of this Agreement, have the right to
determine that the Partnership do any of the following):
13.6.1 sell, exchange or otherwise dispose of any Hotel
Interest or, in the case of the Partnership, all or any portion of the
Partnership's interest in the Underlying Partnership;
13.6.2 incur any indebtedness other than Voluntary Leases
and Priority Loans (it being agreed that for purposes of this subsection 13.6.2
indebtedness shall not include, and Opco GP shall have the right without the
Management Committee's approval to cause the Partnership or the Underlying
Partnership to incur, (A) trade payables for items provided for in a budget
approved by the Partnership pursuant to the applicable Management Agreement or
other management agreement, and (B) equipment leases and similar arrangements so
long as, in the case of the items described in this clause (B), (i) the
aggregate imputed purchase price of the property covered by such leases and
other arrangements in connection with a particular Hotel does not exceed
$100,000, (ii) such leases and other arrangements cover property of the type
customarily financed by owners and operators of Hotels and (iii) payments under
such leases and other arrangements are consistent with the aforesaid approved
budgets);
<PAGE>
48
13.6.3 enter into, cancel, surrender, modify or amend any Operating
Lease (it being agreed that any action described in this subsection 13.6.3 shall
be subject to the approval of both General Partners);
13.6.4 (i) initiate any litigation, or (ii) undertake any course of
defense in connection with any litigation brought against the Partnership or the
Underlying Partnership, or settle any claim, litigation or insurance claim
concerning the Partnership or the Underlying Partnership or any Hotel Interest
owned by the Partnership or the Underlying Partnership, unless, in either case,
(A) the amount involved is $100,000 or less (unless, in the case of the
settlement or defense of claims against the Partnership or the Underlying
Partnership, such claim is completely covered by insurance with a deductible of
$100,000 or less) or (B) such litigation is in the ordinary course of business.
(Opco GP hereby agreeing to deliver or cause to be delivered to the Partners, no
less often then every 90 days, written reports detailing the status of all
claims, litigations and insurance claims concerning the Partnership, the
Underlying Partnership or any Hotel Interest owned by the Partnership or the
Underlying Partnership). Opco GP shall have the right, without the approval of
the Management Committee, to conduct or effect any defense or settlement as to
which, pursuant to the immediately preceding sentence, the approval of the
General Partners is not required.
13.6.5 place any mortgage on any Hotel owned by the Underlying
Partnership or any portion thereof, or encumber the Partnership's interest in
the Underlying Partnership; or prepay, recast, refinance, modify or amend any
such mortgage or any other instrument evidencing or otherwise relating to
indebtedness incurred by the Partnership or the Underlying Partnership;
13.6.6 engage or dismiss any certified public accountants or legal
counsel on behalf of the Partnership or the Underlying Partnership (provided
that Opco GP shall have the right, without the approval of the Management
Committee, to engage or dismiss legal counsel with respect to immaterial Hotel-
specific legal matters);
13.6.7 enter into (i) any lease of space at a Hotel for premises
which exceed 7,500 square feet in area; or (ii) any agreement for the provision
of services to a Hotel which has a term in excess of 12 months (unless such
agreement is terminable by the Underlying Partnership without cause and without
penalty upon not more than 30 days' notice and the payments due thereunder
conform to the applicable budget approved by the Underlying Partnership pursuant
to the applicable Management
<PAGE>
49
Agreement or other management agreement) or which calls for aggregate payments
by the Underlying Partnership of more than $100,000, or modify or amend any such
lease or agreement in any material respect (it being agreed that Opco GP shall
have right, without the approval of the Management Committee, to take any action
with respect to a lease or service contract affecting a Hotel if such action
does not require General Partner approval pursuant to the foregoing);
13.6.8 without limiting the generality of subsection 13.6.4, agree
to the settlement of any proceeding brought for the taking of all or any portion
of any Hotel in condemnation or by eminent domain, or to the sale of all or any
portion of any Hotel in lieu of such taking;
13.6.9 implement any insurance program with respect to the
Partnership or the Underlying Partnership or any Hotel in which the Underlying
Partnership has a direct or indirect debt or equity interest, or modify any such
insurance program in any material respect;
13.6.10 enter into any written employment agreement or severance
arrangement with any individual, or amend or terminate any such agreement;
13.6.11 issue any guaranty on behalf of the Partnership or the
Underlying Partnership of the obligations of any Person;
13.6.12 make any material decisions as to tax planning on
behalf of the Partnership or the Underlying Partnership;
13.6.13 enter into, cancel, surrender, or modify or amend in any
material respect, any franchise agreement with respect to a Hotel (it being
agreed that any action described in this subsection 13.6.13 shall be subject to
the approval of both General Partners);
13.6.14 enter into, cancel, modify or amend any union or collective
bargaining agreement or enroll Hotel employees in any pension, medical and
health, life insurance or any other employee benefit plan, or amend or cancel
any such plan;
13.6.15 take any of the actions described in the second sentence of
Section 13.8 or elect to renew any management agreement after the expiration
<PAGE>
50
of its then current term;
13.6.16 take any actions that result in a material change in the
character of any Hotel in which the Underlying Partnership has a direct or
indirect interest (e.g., from a full-service to a limited-service hotel) (it
being agreed that any action described in this subsection 13.6.16 shall be
subject to the approval of both General Partners);
13.6.17 enter into, cancel, surrender, modify, amend or assign any
ground or underlying lease of land on which a Hotel is situated or which is
acquired in connection with a Hotel (it being agreed that any action described
in this subsection 13.6.17 shall be subject to the approval of both General
Partners);
13.6.18 take any material action on behalf of the Underlying
Partnership in its capacity as the holder of Hotel Debt (in connection with the
Underlying Partnership's relationship with the borrower under such Hotel Debt,
including, without limitation, the exercise of the Underlying Partnership's
rights and remedies against such borrower, and the Underlying Partnership's
entering into amendments to the documents creating and governing, and giving
releases of, such Hotel Debt) or of a Hotel Equity Interest (in connection with
the Underlying Partnership's relationship with other owners of Hotel Equity
Interests relating to the same Hotel(s), including, without limitation, the
exercise of rights and remedies against such other owner(s) and the entering
into amendments to the documents governing such relationship), which the
Underlying Partnership, as such holder, has the right to take;
13.6.19 merge or consolidate the Partnership or the Underlying
Partnership with or into any other entity;
13.6.20 terminate, modify, waive or amend the Underlying Partnership
Agreement (it being agreed that any action described in this subsection 13.6.20
shall be subject to the approval of both General Partners);
13.6.21 perform Capital Improvements other than in substantial
conformance with the budgets, plans and specifications theretofore approved by
the Management Committee under Section 13.5(e) (to the extent such approval is
required) or engage any general contractor or construction manager for the
performance of any Capital Improvement other than a Minor Capital Improvement;
or
13.6.22 take any other action which, pursuant to the
<PAGE>
51
express provisions of this Agreement, is subject to the approval of the
Management Committee.
13.7 Notwithstanding anything to the contrary contained in this
Agreement, if any OHTE Subsidiary is admitted to the Partnership in connection
with the acquisition of a Hotel Interest by the Underlying Partnership, then,
unless OHTE agrees otherwise, such Hotel Interest shall be acquired and owned by
a separate partnership or limited liability company wholly owned, directly or
indirectly, by the Underlying Partnership (an "Operating Subsidiary"). If it is
--------------------
determined in accordance with the provisions of this Agreement that such Hotel
Interest shall be sold, then such sale shall, unless OHTE agrees otherwise, be
effected in the following manner: (i) the Partnership shall cause the
Underlying Partnership to distribute to the Partnership and the limited partner
(s) of the Underlying Partnership all of its interests in the Operating
Subsidiary which owns such Hotel Interest, in proportion to the respective
amounts of cash the Partnership and such limited partners would receive if such
Hotel Interest were being sold by the Underlying Partnership for cash; (ii) the
Partnership shall distribute to the Opco Partners, Oak Hill GP, Oak Hill LP,
OHCMP and the applicable OHTE Subsidiary the interests in the Operating
Subsidiary so distributed to the Partnership, in proportion to the respective
amounts of cash such Partners would receive in connection with a sale of such
Hotel Interest under Section 10.1.3; (iii) OHTE shall sell to the purchaser all
of its stock in the applicable OHTE Subsidiary; and (iv) the Opco Partners, Oak
Hill GP, Oak Hill LP, OHCMP and the limited partner(s) of the Underlying
Partnership shall sell to the purchaser their interests in the Operating
Subsidiary. The aggregate purchase price paid to such Persons, net of the costs
and expenses associated with the sale, shall be allocated between the limited
partner (s) of the Underlying Partnership, on the one hand, and the other such
Persons, on the other hand, in the same proportion as that described in clause
(i) above. The amount so allocated to such other Persons shall be allocated
among such Persons in the same proportion as that defined in clause (ii) above.
Nothing herein shall limit the ability of the Underlying Partnership to acquire
Hotel Interests through Operating Subsidiaries notwithstanding that the use of
Operating Subsidiaries may not be required under this Section 13.7. If a Hotel
Interest shall be acquired through an Operating Subsidiary, all of the
provisions of this Agreement applicable to Hotel Interests owned by the
Underlying Partnership shall apply to the Hotel Interests owned by such
Operating Subsidiary.
13.7.1 In the event of a sale of the type hereinabove
described in this Section 13.7, each of the Opco Partners, Oak Hill GP, Oak Hill
LP, OHCMP and OHTE shall be required to take all action that the General
Partners
<PAGE>
52
reasonably deem necessary or desirable to effectuate such sale, including
without limitation the execution of a contract of sale with respect to the sale
of its interest in the Operating Subsidiary or the stock of the applicable OHTE
Subsidiary, as the case may be (which contract may include customary and
reasonable representations by OHTE with respect to the applicable OHTE
Subsidiary). If the contract(s) of sale entered into by the parties shall
provide for any "post-closing" liability (other than with respect to Internal
Representations) which is joint and several between one or more Partners and/or
their Affiliates, or which is undertaken solely by one or more Partners and/or
their Affiliates (but not other Partners and/or their Affiliates), the party or
parties incurring such liability shall have the right to determine that a
reasonable portion of the aggregate purchase price allocated to the Partners
and, if applicable, OHTE pursuant to the foregoing portions of this Section 13.7
be deposited into an interest-bearing reserve account. Such reserve account
shall be maintained by an escrow agent selected by the such parties for the
purpose of disbursing such reserves in payment of any such post-closing
liability suffered or incurred by such parties and all reasonable costs and
expenses, including, without limitation, reasonable attorneys' fees and
expenses, incurred by such parties in connection therewith. At the expiration of
such period as such parties reasonably deem advisable (which period shall not be
longer than the so-called "survival period" of such post-closing liability), all
remaining funds in such reserve account (except for such funds as such parties
reasonably deem necessary for the purpose of satisfying any then-pending claims)
shall be distributed to the Partners and, if applicable, OHTE pro rata in
proportion to the amounts to which they are entitled under the introductory
paragraph of this Section 13.7. Such parties shall cooperate in defending and
settling all claims which, if successful, would result in liability that would
be satisfied, in whole or in part, out of such reserve account. The provisions
of this Section 13.7 regarding the establishment of a reserve account shall,
notwithstanding anything to the contrary contained in this Agreement, also be
applicable in the case of a sale of any Hotel Interest by the Underlying
Partnership, or of Partnership Interests by the Partners, effected pursuant to
any other provision of this Agreement.
13.7.2 Notwithstanding anything to the contrary contained in the
foregoing if, at the time of a sale pursuant to this Section 13.7, there are any
outstanding Default Loans owing by a transferring party (or, in the event OHTE
is the transferring party, by any OHTE Subsidiary), any sale proceeds to which
such transferring party would otherwise be entitled hereunder shall instead, to
the extent of the outstanding principal balance, and accrued unpaid interest on,
such Default Loans, be paid to the Persons constituting the Non-Defaulting
Partner and applied first to the interest, and then to the principal, owed to
such Persons (in proportion to the respective
<PAGE>
53
amounts of interest or principal, as applicable, owed to each such Person).
13.8 Simultaneously with the purchase of any Hotel by the
Underlying Partnership, the Partnership (i) shall enter into an Operating Lease
with the Underlying Partnership in the form annexed hereto as Exhibit C (with
---------
the fixed and percentage rent payable thereunder being determined, by agreement
of the General Partners), and (ii) shall, in its capacity as operating lessee
under such Operating Lease, enter into a management agreement ("Management
----------
Agreement") with MeriStar Management Company, LLC, an Affiliate of Opco GP
- ---------
(sometimes referred to herein as the "Managing Agent"), as manager, with respect
--------------
to such Hotel in the form annexed hereto as Exhibit B, having a term of five (5)
---------
years, with all fees not specified in Exhibit B to be determined by the General
---------
Partners and the Managing Agent. The Management Committee shall have the right,
on behalf of the Partnership, to elect whether to renew any Management Agreement
after the expiration of its then current term, to elect whether to execute any
amendment to any Management Agreement, to elect whether notices of default and
termination under any Management Agreement should be given (or whether defaults
under any Management Agreement should be waived) and otherwise to elect to have
the Partnership cause the obligations of the Managing Agent or managing agent
thereunder to be enforced, to exercise on behalf of the Partnership all approval
and other rights under any Management Agreement and to make all decisions and
elections which the Partnership, as owner, is entitled to make under any
Management Agreement. If the Management Committee elects to have the
Partnership exercise any termination right under any Management Agreement or
decline to renew any Management Agreement or other management agreement, the
Partnership shall terminate, or shall not renew, such Management Agreement and
shall retain, with respect to the Hotel in question, the services of another
managing agent selected by the Management Committee.
13.9 The Partnership shall reimburse each Partner for all
reasonable out-of-pocket costs (including, without limitation, reasonable travel
expenses) incurred by such Partner in connection with the performance of its
duties and responsibilities under this Agreement, provided that no such
reimbursement shall be made for (i) any such costs as to which such Partner or
an Affiliate thereof was reimbursed pursuant to any Management Agreement or the
Underlying Partnership Agreement or (ii) any costs associated with the proposed
acquisition of Hotel Interests which are not in fact acquired. For purposes of
the immediately preceding sentence, the term "out-of-pocket costs" shall not
include compensation of regular personnel of any Partner (or Affiliate thereof)
or other overhead expenses. Except as provided in this
<PAGE>
54
Section 13.9 or under any separate agreement between a Partner and the
Partnership or the Underlying Partnership, no Partner shall receive any
compensation or reimbursement for services rendered by it, him or her to the
Partnership or the Underlying Partnership or for costs incurred or time expended
by it, him or her on behalf of the Partnership or the Underlying Partnership.
13.10 The fact that a Partner or an Affiliate of a Partner (the
"Affiliated Partner") is directly or indirectly interested in or connected with
------------------
any Person employed by the Partnership or the Underlying Partnership to render
or perform a service or from which or to whom the Partnership or the Underlying
Partnership may buy or sell merchandise or other property or with whom the
Partnership or the Underlying Partnership shall otherwise have dealings shall
not prohibit the Partnership or the Underlying Partnership from employing such
Person or from dealing with it on competitive terms and at competitive rates of
compensation, and neither the Partnership, the Underlying Partnership, nor the
other Partners shall have any right in or to any income or profits derived
therefrom; provided, however, that no such arrangement shall be entered into
unless the General Partner which is not an Affiliated Partner has been given
prior notice thereof and such General Partner shall have approved such
arrangement (such approval not to be unreasonably withheld if such arrangement
is on arms'-length terms). No such arrangement shall be modified or extended
without the prior approval of such General Partner.
13.11 No Partner shall be liable, responsible or accountable in
damages or otherwise to the other Partners or to the Partnership or the
Underlying Partnership for any acts performed within the scope of the authority
conferred on it by this Agreement, or for its failure or refusal to perform any
acts except those expressly required by or pursuant to the terms of this
Agreement, or for any loss in connection with the affairs of the Partnership or
the Underlying Partnership, unless such Partner is guilty of fraud, willful
misconduct or gross negligence or violates any of the provisions of this
Agreement in any material respect. To the extent permitted by law, the
Partnership shall (to the extent of assets of the Partnership) indemnify, defend
and hold harmless each Partner and each owner of interests (direct or indirect)
in, and each officer and director of, each Partner (and each officer and
director of each such direct or indirect owner) from and against all losses,
expenses, damages, claims or liabilities, including, without limitation,
reasonable attorneys' fees and expenses (each Partner and each such other Person
to be reimbursed for such attorneys' fees and expenses by the Partnership
promptly after periodic (but not more than monthly) written requests therefor to
the Partnership, but only so long as Opco GP (if the Person seeking
reimbursement is, or is
<PAGE>
55
employed by or otherwise associated with, an Oak Hill Partner) or Oak Hill GP
(if the Person seeking reimbursement is, or is employed by or otherwise
associated with, an Opco Partner) in good faith believes that the applicable
action or omission which is the subject of the claim in question does not
constitute fraud, willful misconduct or gross negligence), arising out of or in
connection with any action taken or omitted to be taken by such Partner in
respect of the affairs of the Partnership or the Underlying Partnership, other
than an action or omission by such Partner which constitutes a material
violation of this Agreement or which constitutes fraud, willful misconduct or
gross negligence. Each Partner, and each owner of interests (direct or indirect)
in, and each officer, employee and director of, each Partner, shall, in acting
on behalf of or in connection with the Partnership or the Underlying
Partnership, be entitled to rely on the advice of the independent attorneys and
the independent certified public accountants then engaged by the Partnership or
the Underlying Partnership, and any act or omission in reliance on such advice
shall not subject such Partner, or such owner, officer, employee or director, to
liability to the Partnership, the Underlying Partnership or to the other
Partners. All references in this Section 13.11 to a Partner shall be deemed to
include their respective investment advisors and the officers, employees and
directors thereof and owners of interests (direct and indirect) therein.
13.12 Notwithstanding any other provision hereof, the Partnership
shall not, without the unanimous written consent of the Partners, do any of the
following:
13.12.1 amend, or do any acts in contravention of, this
Agreement;
13.12.2 engage in any activity not within the purposes
enumerated in Article 5;
13.12.3 do any act that would make it impossible to carry on
the business of the Partnership;
13.12.4 dissolve or voluntarily terminate the Partnership
(except where the dissolution of the Partnership is required under Section 15.1
hereof);
13.12.5 admit a new Partner other than in accordance with
the provisions of Article 14 or Section 8.1; or
13.12.6 request or accept any capital contribution or loan
from a Partner other than in accordance with the provisions of Article 8.
<PAGE>
56
13.13 Except as otherwise specifically provided in this Agreement,
no Limited Partner shall have any right to participate in the management,
affairs or operation of the business of the Partnership.
13.14 The Partners acknowledge and confirm that without limiting
any provision hereof, the Partnership or the Underlying Partnership may, in the
Management Committee's sole discretion, purchase and maintain a so-called
"general partners liability and limited partnership reimbursement" insurance
policy covering the General Partners (and their members, officers and directors)
in their capacity as general partners of the Partnership which policy may (i)
include so-called "errors and omissions" coverage for Opco GP (and its members,
officers and directors) and (ii) also cover the Partnership (and its officers
and directors) in its capacity as general partner of the Underlying Partnership.
The entire cost of any such policy shall be borne by the Partnership or the
Underlying Partnership, as applicable.
13.15 If Oak Hill so requests, the Partners shall negotiate in
good faith to restructure the Partnership and the Underlying Partnership such
that interests in the Underlying Partnership are distributed or otherwise
transferred to the OHTE Subsidiaries in redemption of their interests in the
Partnership. In such event, or if one or more OHTE Subsidiaries are otherwise
admitted as partners of the Underlying Partnership, the General Partners shall
cause the Partnership, as general partner of the Underlying Partnership, to
amend the provisions of the Underlying Partnership Agreement so as to cause the
terms of the interests in the Underlying Partnership held by such OHTE
Subsidiaries to be essentially equivalent to the terms of their redeemed
interests in the Partnership (or, in the case of OHTE Subsidiaries not
previously admitted as Partners of the Partnership, the interests in the
Partnership they would have acquired under Section 8.1). In such event the
General Partners shall also (i) amend the provisions of Article 14 to provide
that the Go-Along Option shall not apply with respect to the ownership and
transfer of such interests in the OHTE Subsidiaries as are necessary in order
that the OHTE Subsidiaries qualify as real estate investment trusts within the
meaning of (S) 856 of the Code and (ii) enter into such other amendments to this
Agreement, and cause the Partnership to enter into such other amendments to the
Underlying Partnership Agreement, as are reasonably necessary or desirable to
give effect to such restructuring and, at the same time, preserve the rights and
obligations of the Partnership, and those of the partners in the Underlying
Partnership, in light of such restructuring.
<PAGE>
57
13.16 If the Partnership shall incur any liability under Section
12.4 of the Underlying Partnership Agreement as a result of any action which has
not been approved by, or is not included in a budget, business plan or proposal
approved by, the Management Committee, then the Opco Partners shall,
notwithstanding anything to the contrary contained in this Agreement, be solely
responsible for providing all such funds as are necessary to satisfy such
liability.
13.17 The Partners agree that they shall take such actions as are
reasonably necessary in order that the Partnership meet any net worth or similar
requirements contained in the Operating Leases; provided that in no event shall
any Oak Hill Partner be required to give any guaranty of the rents or any other
amounts payable under the Operating Leases, nor shall any Partner be required to
increase its Commitment or make capital contributions in excess of its
Commitment.
14. Transfer of Partnership Interests.
---------------------------------
14.1 Except as provided in the further provisions of this Article
14, no Partner shall Transfer all or any portion of its Partnership Interest, or
any interest therein, or resign from the Partnership, without the prior written
consent of both General Partners, and any attempt so to do shall be void and of
no force or effect. Any conveyance, sale, assignment or transfer of a
Partnership Interest deemed to be such by operation of law shall be deemed to be
a transfer of such Partnership Interest for purposes of this Article 14. Except
as hereinafter provided in this Article 14, nothing in this Agreement shall
prohibit the assignment, transfer or other disposition, or the encumbrance, of
direct or indirect equity interests in any Partner.
14.2 (a) If, at any time during the term of this Agreement, the
Partnership Interest of Opco GP or Opco LP shall, without the prior written
consent of Oak Hill GP, cease to be held by a Qualified Opco Entity (as
hereinafter defined), then Opco GP or Opco LP, as applicable, shall be deemed to
have transferred its interest in the Partnership in violation of Section 14.1.
Notwithstanding anything to the contrary contained in Section 14.1, each of Opco
GP and Opco LP shall have the right, without the consent of Oak Hill GP, to
assign or transfer (but not to pledge, hypothecate or otherwise encumber) its
Partnership Interest to a Qualified Opco Entity. As used herein, the term
"Qualified Opco Entity" shall mean and include each of the following: (i) MHR,
any Permitted MHR Transferee or any Affiliate of MHR or a Permitted MHR
Transferee and (ii) any Permitted Opco Transferee or any Affiliate of a
Permitted Opco Transferee. Each of Opco GP and Opco LP represents and warrants
that as of the date hereof, (A) all
<PAGE>
58
of the equity interests in Opco GP are owned, on an unencumbered basis, by Opco
LP and (B) the sole general partner of Opco LP is MHR. Opco GP and Opco LP
shall, promptly upon request by Oak Hill GP (which request shall be made not
more than twice in any twelve-month period), furnish Oak Hill GP with a
certificate certifying that as of the date of such certificate no event
prohibited under this Section 14.2 or Section 14.1 has occurred (or, if such
event has occurred, describing the particulars thereof).
(b) The Oak Hill Partners each represent and warrant that
as of the date hereof (i) 100% of the equity interests in Oak Hill GP are owned,
on an unencumbered basis, by Oak Hill Parent.
14.3 (a) Subject to paragraph (e) of this Section 14.3, the Oak
Hill Partners may, at any time, deliver to Opco GP a written bona fide offer
(the "Required Purchase Offer") from a Person or Persons none of whom is an
-----------------------
Affiliate of the Oak Hill Partners (collectively, the "Required Purchaser") to
------------------
purchase the Partnership Interests of all of the Partners, which Required
Purchase Offer shall set forth all of the material terms and conditions of the
proposed purchase (the "Required Purchase") of the Partnership Interests,
-----------------
including the aggregate consideration (the "Required Purchase Price") that the
-----------------------
Required Purchaser would pay if it were acquiring all of the assets (subject to
all of the liabilities) of the Underlying Partnership, and shall include the
identity of the Required Purchaser. If the Required Purchase Offer is given,
the Opco Partners shall be obligated to join with the Oak Hill Partners in
selling all of the Partnership Interests on the terms and conditions set forth
in the Required Purchase Offer and hereinafter set forth in this Section 14.3.
(b) In the event that the Partners shall, pursuant to
subsection (a) of this Section 14.3, be obligated to sell the Partnership
Interests to the Required Purchaser, then each Partner shall be required to take
all actions that the Oak Hill GP reasonably deems necessary or desirable to
effectuate the closing of such sale, including, without limitation, the
execution of a contract of sale with respect to the sale of its Partnership
Interest or the Partnership Interests of all of the Partners. At the closing of
the Required Purchase, each Partner shall receive its proper share of the
Required Purchase Price pursuant to the further provisions of this Section 14.3.
(c) Each Partner shall receive, as its portion of the
aggregate purchase price in respect of any Required Purchase, an amount equal to
its Allocated Required Purchase Price; provided, however, that the reasonable
and customary expenses of each Partner in connection with the transfer of the
Partnership
<PAGE>
59
Interests to the Required Purchaser (including, without limitation, any
reasonable attorneys' fees and expenses and any brokerage fees) shall, prior to
the allocation of the Required Purchase Price among the Partners, be paid (or
reimbursed) out of the Required Purchase Price. As used herein, the term
"Allocated Required Purchase Price" shall mean, with respect to any Partner,
---------------------------------
that amount which such Partner would receive under this Agreement if, on the
same date as the Required Purchase closing, all of the assets (subject to all of
the liabilities) of the Underlying Partnership were sold at an all-cash price
equal to the Required Purchase Price, the proceeds of such sale were then
distributed to the partners of the Underlying Partnership and the amount so
distributed to the Partnership (after satisfying any liabilities of the
Partnership) were then distributed to the Partners as required pursuant to
Section 15.2.4 (without regard to limitations imposed by Adjusted Capital
Account deficits). Notwithstanding the foregoing or anything to the contrary
contained in Article 8, if at the time the Partnership Interests are sold there
are any outstanding Default Loans owing by a Defaulting Partner, then any sale
proceeds to which such Defaulting Partner would otherwise be entitled hereunder
shall instead, to the extent of the outstanding principal balance of, and
accrued and unpaid interest on, such Default Loans, be paid to the Persons
constituting the Non-Defaulting Partner and applied first against such interest
and then against such principal in proportion to the respective amounts of such
interest and principal owed to each such Person).
(d) The foregoing provisions of this Section 14.3 shall apply not only
with respect to the share of Partnership Interests but also, in the case of the
OHTE Subsidiaries, with respect to the stock thereof, and all of such provisions
relating to the Oak Hill Partners' Partnership Interests shall apply with
respect to such stock.
(e) Subject to Section 14.5, no Oak Hill Partner shall enter into any
contract or binding letter of intent in connection with the sale of its
Partnership Interest or any portion thereof to third parties, and Oak Hill GP
shall not deliver to the Opco Partners a Required Purchase Offer or a Go-Along
Notice, unless (x) Oak Hill GP shall have first notified Opco GP in writing of
the desire of such Oak Hill Partner to sell its Partnership Interest or such
portion and (y) either (A) Opco LP, on the one hand, and such Oak Hill Partner,
on the other hand, shall have failed, notwithstanding good faith negotiations,
to execute a binding agreement for the purchase of the Partnership Interests of
such Oak Hill Partner or such portion within 20 days after the giving of the
foregoing notification or (B) Opco LP shall have waived its rights under this
sentence. If the conditions set forth in the foregoing clauses (x) and (y) are
satisfied, but Oak Hill GP does not deliver to Opco GP a Required Purchase Offer
or a Go-Along Notice within 180 days after the expiration of the above described
20-day period or Opco
<PAGE>
60
of the proposed transfer, (b) the identity of and financial information
concerning the proposed transferee (the "Go-Along Purchaser"), LP's waiver of
its rights under the preceding sentence, whichever is applicable, the Oak Hill
Partners shall no longer be permitted to undertake any of the actions described
in said sentence without once again complying with the provisions of said
sentence, provided that said 180-day period shall be extended, up to a maximum
of 270 days, so long as the Oak Hill Partner in question is actively negotiating
the sale of its Partnership Interest or such portion with a third party. The
foregoing provisions of this Section 14.3(e) shall also apply with respect to
the sale of direct and indirect interests (or portions thereof) in any Oak Hill
Partner, except for sales as to which a Go-Along Notice would not be required to
be given under Section 14.4.
14.4 Subject to Section 14.5, no Oak Hill Partner shall be
permitted, without the prior written consent of Opco GP, to Transfer its
Partnership Interest or any portion thereof except in accordance with Section
14.3 or this Section 14.4 (and any attempt to effectuate such a transaction
without the consent of Opco GP shall be void and of no force and effect). In
addition, notwithstanding anything to the contrary hereinafter set forth in this
Section 14.4, but subject to the provisions of Section 14.5, (i) all of the
equity interests in Oak Hill GP shall at all times continue to be owned,
directly or indirectly, by Oak Hill LP, and (ii) Oak Hill GP shall not have the
right to Transfer its Partnership Interest, and OHTE shall not have the right to
Transfer or delegate its right to appoint a member of the Management Committee
(other than to another Oak Hill Partner which is an Exempt Person), except in
its entirety and except in connection with the Transfer of all of the
Partnership Interests of Oak Hill LP, OHCMP, OHTE and any OHTE Subsidiaries,
and/or all of the direct or indirect equity interests in such entities, to a
Person or Persons which are not Affiliate(s) of the Oak Hill Partners. The Oak
Hill Partners shall, promptly upon request by Opco GP (which request shall be
made not more than twice in any twelve-month period), furnish Opco GP with a
certificate certifying that as of the date of such certificate no event
prohibited under this Section 14.4 has occurred (or, if such event has occurred,
describing the particulars thereof).
14.4.1 Prior to the transfer (which term, for purposes of this
Section 14.4, shall not include a pledge, hypothecation or other encumbrance) of
all or any portion of the Partnership Interest of any Oak Hill Partner (for
purposes of this Section 14.4, the "Selling Partner"), Oak Hill GP shall give
---------------
the Opco Partners written notice (the "Go-Along Notice") advising the Opco
---------------
Partners of the proposed transfer, which notice shall set forth (a) all of the
material terms and conditions, including consideration (the "Go-Along Terms") of
--------------
the proposed transfer, (b) the identity of and financial information concerning
the proposed transferee (the "Go-Along Purchaser"),
------------------
<PAGE>
61
(c) the maximum amount (the "Maximum Amount") the Go-Along Purchaser is willing
--------------
to pay in the aggregate for one or more Partnership Interests (or portions
thereof), (d) if the Selling Partner proposes to sell less than all of its
Partnership Interest, the percentage (the "Go-Along Percentage") proposed to be
-------------------
sold, and (e) the purchase price that would be paid to each Partner by the Go-
Along Purchaser for its Partnership Interest (or the Go-Along Percentage)
pursuant to subsection 14.4.4 if each Partner exercised the Go-Along Option.
14.4.2 Within twenty (20) days after delivery of an effective Go-
Along Notice, each Opco Partner shall give written notice to the Selling Partner
(i) that such Partner elects to transfer its Partnership Interest (or if the
Selling Partner Proposes to sell less than all of its Partnership Interest, the
Go-Along Percentage of such Partner's Partnership Interest) to the Go-Along
Purchaser on the Go-Along Terms (the "Go-Along Option") or (ii) that such
---------------
Partner elects not to transfer any portion of its Partnership Interest to the
Go-Along Purchaser (the "Non-Transfer Option"). A Partner shall be conclusively
-------------------
deemed to have elected the Non-Transfer Option if it fails to elect either of
the above-described options within such twenty (20) day period.
14.4.3 If the Opco Partners elect or are deemed to have elected the
Non-Transfer Option, the Selling Partner shall be permitted to transfer its
Partnership Interest to the Go-Along Purchaser on the Go-Along Terms (or on
terms less favorable to the seller than the Go-Along terms), so long as such
transfer takes place within 180 days of the Go-Along Notice.
14.4.4 If one or more of the Opco Partners (the "Electing
--------
Partner(s)") shall elect the Go-Along Option, then the Selling Partner shall not
- ----------
transfer its Partnership Interest (or any portion thereof) to the Go-Along
Purchaser unless such Go-Along Purchaser acquires, simultaneously with its
acquisition of the Selling Partner's Partnership Interest (or the Go-Along
Percentage thereof), the Partnership Interests (or the Go-Along Percentages
thereof) of the Electing Partners at a purchase price, with respect to each such
Partner, equal to the amount such Partner would receive if all of the assets
(subject to all of the liabilities) of the Underlying Partnership were sold at a
price which would result in the Selling Partner receiving the purchase price for
the Selling Partner's Partnership Interest (or Go-Along Percentage thereof) set
forth in the Go-Along Notice, assuming that the proceeds of such sale were
distributed to the partners of the Underlying Partnership, and the amount so
distributed to the Partnership was then distributed to the Partners (after
satisfying any liabilities of the Partnership) as required pursuant to Section
15.2.4 (without regard to limitations imposed by Adjusted Capital
<PAGE>
62
Account deficits); provided, however, that (i) if the sum of the purchase prices
to be paid to each such Partner pursuant to the foregoing exceeds the Maximum
Amount, the purchase price to be paid to each such Partner, and the percentage
of the Partnership Interest of each such Partner to be transferred to the Go-
Along Purchaser, shall be reduced pro rata, in accordance with the respective
purchase prices that would have been paid to each such Partner pursuant to the
foregoing, so that the sum of the purchase prices equals the Maximum Amount,
(ii) the aggregate reasonable and customary expenses of the transferring
Partners incurred in connection with the transfer of their Partnership Interests
(including, without limitation, any reasonable attorneys' fees and expenses and
any brokerage fees) shall be paid (or reimbursed) out of the aggregate purchase
price paid to such Partners and (iii) if, at the time of the transfer there are
any outstanding Default Loans owing by a transferring Partner, any sale proceeds
to which such transferring Partner would otherwise be entitled hereunder shall
instead, to the extent of the outstanding principal balance, and accrued unpaid
interest on, such Default Loans, be paid to the Persons to whom such principal
and interest are owed and applied first to such interest (in proportion to the
respective amounts of such interest owed to each such Person) and then to such
principal (in proportion to the respective amounts of such principal owed to
each such Person).
14.4.5 Each Partner who exercises the Go-Along Option shall take all
actions necessary to cause the applicable Partnership Interest (or the Go-Along
Percentage thereof) to be transferred to the Go-Along Purchaser as set forth in
subsection 14.4.4, such actions to include, without limitation, executing a
contract of sale if requested to do so by the Go-Along Purchaser and complying
with the terms thereof. If the Opco Partners do not elect the Go-Along Option
and the sale of the Selling Partner's Partnership Interest (or the Go-Along
Percentage thereof) on the Go-Along Terms (or on terms less favorable to the
seller than the Go-Along Terms) does not occur within 180 days after the
delivery of the Go-Along Notice, the Opco Partners shall have the right to
require that the Selling Partner not be permitted to transfer its Partnership
Interest (or any portion thereof) without once again complying with this Section
14.4, provided that said 180-day period shall be extended, up to a maximum of
270 days, so long as the Selling Partner (and/or any Partner that elected the
Go-Along Option) is actively negotiating the sale of its Partnership Interest
with the Go-Along Purchaser. If a Partner does not comply with the provisions
of this subsection 14.4.5 and, as a result, the applicable Partnership Interest
(or the Go-Along Percentage thereof) is not transferred to the Go-Along
Purchaser as provided for in subsection 14.4.4, the Selling Partner shall be
permitted to transfer its Partnership Interest to the Go-Along Purchaser
(subject, however, to the provisions of subsection 14.4.4 and this subsection
14.4.5 with respect to all Partners who
<PAGE>
63
exercise the Go-Along Option and who comply with the provisions of this
subsection 14.4.5).
14.5 (A) Each Oak Hill Partner shall be permitted, without having
to comply with the provisions of Section 14.4 or 14.3(e), to transfer or assign
(but not pledge, hypothecate or otherwise encumber) all or (in the case of each
Oak Hill Partner other than Oak Hill GP) any portion of its Partnership Interest
to (i) the other of them or (ii) any Affiliate of Oak Hill Parent which is
wholly owned, directly or indirectly, by Oak Hill Parent or one or more
investors in Oak Hill Parent.
(B) For purposes of Sections 14.4 and 14.3(e), the transfer of
a direct or indirect equity interest in an Oak Hill Partner (other than an
interest in (i) Oak Hill Parent, (ii) OHCMP or (iii) any Affiliate of Oak Hill
Parent all of the equity interests in which are held directly by one or more
investors in Oak Hill Parent (any Person described in clause (i), (ii) or (iii),
an "Exempt Person")) shall be deemed a transfer of such portion of such
-------------
Partner's Partnership Interest as would occur if such Partnership Interest were
owned directly by the transferor and the other direct and/or indirect (as
applicable) owners of such Partnership Interest, the same economic rights and
benefits vis-a-vis each other as such Persons have partners, members or
shareholders of the applicable entities, and the transferor were transferring
its direct interest (or applicable portion thereof) in the Partnership;
provided, however, that the transferor shall have the right, without having to
comply with the provisions of Section 14.4 or 14.3(e), to transfer or assign all
or any portion of its equity interest to an Exempt Person.
(C) Oak Hill GP shall, at least 10 days prior to the
occurrence of any Transfer to an Exempt Person, or any Transfer (other than a
Transfer described in clause (i) of Section 14.5) which does not trigger the
provisions of Section 14.4, notify Opco GP of the same.
14.6 Notwithstanding anything to the contrary contained in this
Article 14, prior to the earlier to occur of (i) the date that the Capital
Commitments have been fully funded and (ii) the Commitment Expiration Date, no
Transfer of any Partnership Interest, and no Transfer of any direct or indirect
interest in any Partner, otherwise permitted hereunder shall be effected unless
the ability of Transferee, or the Partner the interest in which is Transferred,
to fund the remaining portion of its Capital Commitment is unimpaired by such
Transfer.
14.7 No assignment or transfer of all or any part of a Partnership
<PAGE>
64
Interest otherwise permitted to be made under this Article 14 shall be permitted
or binding on the non-assigning Partners or on the Partnership unless (i) the
assignee or transferee shall execute and acknowledge an instrument, in form
reasonably satisfactory to the non-assigning Partners, whereby it agrees to
assume and be bound by all of the obligations, covenants, terms and conditions
of this Agreement, as the same may have been amended, and grants any power of
attorney granted herein by the assignor or transferor, (ii a duplicate original
of such assignment (or other instrument of transfer) and assumption, duly
executed and acknowledged in each case, shall be delivered to each non-assigning
Partner, (ii the assignee or transferee shall (if required) execute and
acknowledge a certificate amending this Agreement and/or the Certificate of
Limited Partnership of the Partnership in order to reflect such assignment or
transfer or take any other action that may be required in connection therewith,
(iv unless the assignment is to an OHTE Subsidiary, the assignee or transferee
shall pay all reasonable expenses in connection with its admission as a Partner,
including, but not limited to, the cost (including reasonable attorneys' fees)
of preparing and filing the certificate referred to in subdivision (iii) above,
(v) all required consents of mortgagees or other Persons to such assignment or
transfer shall have been obtained in writing and delivered to the non-assigning
Partners, (vi unless the assignment is to an OHTE Subsidiary and occurs on or
before June 1, 1999, the assignor or transferor shall provide the non-assigning
Partners with an indemnity, in form and substance reasonably acceptable to the
non-assigning Partners, indemnifying the non-assigning Partners against all
losses, costs, damages, claims, liabilities and expenses (including, without
limitation, reasonable attorneys' fees and expenses) suffered or incurred by
such Partners by reason of such assignment or transfer resulting in a
termination of the Partnership under Section 708 of the Code (including without
limitation losses resulting from the deferral of deductions or the acceleration
of income) and (vi unless the assignment or transfer is pursuant to Section 15.3
or 8.1, the assignor or transferor shall provide the non-assigning Partners with
an opinion of counsel reasonably acceptable (both with respect to the identity
of such counsel and the form and substance of such opinion) to the non-assigning
Partners to the effect that the assignment or transfer to the assignee or
transferee was not made in violation of any applicable federal or state
securities laws. Upon satisfaction of the requirements set forth in the
immediately preceding sentence, (a) the assignee or transferee shall be admitted
to the Partnership as a Partner and shall succeed to all of the rights of the
assigning or transferring Partner (including, without limitation, all of the
rights of the assigning or transferring Partner set forth in Article 13 and all
of the rights described in clauses (b) and (c) of Section 15.5) and (b) the
assigning Partner shall be relieved of all of its obligations under this
Agreement thereafter accruing.
<PAGE>
65
14.8 Notwithstanding anything to the contrary contained in this
Agreement, no Transfer of direct or indirect interests in a Partner shall be
effected if such Transfer would violate the provision of any loan agreement,
mortgage, deed of trust or other agreement or instrument to which the
Partnership or the Underlying Partnership is a party.
14.9 Notwithstanding anything to the contrary contained in this
Agreement, and without limiting the rights of Opco GP and Opco LP under Section
14.2(a) of this Agreement, if there shall be a Change in Control with respect to
MHR or if MHR no longer controls Opco GP (as the term "control" is defined in
the definition of "Affiliate" contained herein), then (i) the Management
Committee shall have the right to cause the Underlying Partnership to terminate
the Management Agreements (whether or not the Managing Agent is then in default
thereunder) and (ii) Opco LP shall, at the election of Oak Hill GP, no longer be
entitled to distributions under Sections 10.1.2(ii) and 10.1.3(ii) hereof. The
parties acknowledge that the Credit Facility contains certain restrictions on
the right of the Underlying Partnership to replace the Managing Agent.
14.10 Without the prior written consent of Oak Hill GP, or the
Management Committee, the Partnership shall not enter into any debt instrument
or other agreement which would limit or restrict the ability of OHTE to transfer
its interest pursuant to Section 8.1 (or which would limit or restrict the
admission of OHTE Subsidiaries as additional Limited Partners) or which contain
covenants, representations and warranties which would be violated by any such
transfer (or such admission).
15. Dissolution and Liquidation; Bankruptcy or Insolvency of a Partner.
------------------------------------------------------------------
15.1 The occurrence of any of the following events shall cause the
dissolution of the Partnership:
(i) an Act of Insolvency committed by either General Partner,
the dissolution of either General Partner without reconstitution within 90
days, or the withdrawal of either General Partner from the Partnership,
unless in each case the other General Partner elects to continue the
Partnership within ninety (90) days after such Act of Insolvency,
dissolution or withdrawal; or
(ii) the sale or other disposition of all of the Hotel
Interests
<PAGE>
66
then owned by the Underlying Partnership, if the General Partners determine
that no further acquisitions of Hotel Interests are to be made by the
Underlying Partnership, or the sale or other disposition of the
Partnership's interest in the Underlying Partnership; or
(iii) the expiration of the term provided for in Article 4
hereof.
All Partners at the time of dissolution shall execute such documents as are
necessary or desirable to cause the complete dissolution of the Partnership.
Upon any dissolution of the Partnership, the Partnership shall wind up its
affairs and shall then be liquidated in accordance with the further provisions
of this Article 15.
15.2 Upon any dissolution of the Partnership, each of the
following shall be accomplished:
15.2.1 Opco GP shall cause to be prepared a statement setting
forth the assets and liabilities of the Partnership as of the date of
dissolution and such statement shall be furnished to the other Partners.
15.2.2 All property and assets of the Partnership not
previously sold shall be liquidated as promptly as possible under the direction
of Opco GP, but in an orderly and businesslike manner so as not to involve undue
sacrifice.
15.2.3 The Capital Accounts of the Partners shall be adjusted
to take into account allocations pursuant to Article 9.
15.2.4 The net proceeds of sale or other disposition of the
Partnership's assets, and all other assets of the Partnership, shall be paid and
distributed as follows and in the following order of priority:
15.2.4.1 To the payment of the debts and liabilities
of the Partnership and the expenses of liquidation, if applicable.
15.2.4.2 To the setting up of any reserves which the
Management Committee determines are reasonably necessary for any contingent
or unforeseen liabilities or obligations of the Partnership. Such reserves
may, in the discretion of the Management Committee, be paid over to an
<PAGE>
67
escrow agent selected by the Management Committee to be held by it for the
purpose of disbursing such reserves in payment of any of the aforementioned
contingencies, and at the expiration of such period as the Management
Committee may deem advisable, to distribute the balance thereafter
remaining as provided in the further provisions of this subsection 15.2.4.
15.2.4.3 Any remaining proceeds shall be distributed
to the Partners as set forth in Article 10, provided that no Partner shall
be distributed any amount in excess of its Capital Account balance, and any
such excess amount shall instead be distributed among the Partners with
positive Capital Account balances in proportion to such balances.
15.2.5 Upon liquidation, distribution of assets may be in
kind, or in cash, or both, as the General Partners shall decide, and in the
order of priority listed in subsection 15.2.4; provided, however, that all in-
kind distributions shall be pro rata to the extent practicable and to the extent
each Partner is entitled to share in such distribution. The value of assets
distributed in kind shall be determined in accordance with the provisions of
Section 10.5.
15.2.6 If the dissolution of the Partnership is pursuant to
clause (i) of Section 15.1, then all tasks, duties and obligations of the
General Partners set forth in this Article 15 in connection with such
dissolution shall be performed and carried out solely by whichever of them did
not dissolve, withdraw or commit an Act of Insolvency.
15.3 In the event (i) a Partner at any time commits an Act of
Insolvency or (ii) such Partner dissolves without reconstitution within 90 days
after such dissolution (the Partner in question being herein called the "Non-
---
Qualified Partner"), Oak Hill GP (or, if an Oak Hill Partner is the Non-
- -----------------
Qualified Partner, Opco GP) shall have the option, exercisable by notice in
writing to the Non-Qualified Partner or to the legal representative(s) or
successor(s) of the Non-Qualified Partner given within 60 days after the date on
which Oak Hill GP (or Opco GP, as the case may be) first learned that the Act of
Insolvency was committed or that such dissolution occurred, as the case may be,
to acquire the Partnership Interest of the Non-Qualified Partner for a price
(for purposes of this Section 15.3, the "Purchase Price") equal to the amount
--------------
which would be distributed to the Non-Qualified Partner pursuant to Article 10
if all of the assets (subject to all of the liquidated liabilities) of the
Underlying Partnership (or, if the Non-Qualified Partner is an OHTE Subsidiary,
the Hotel Interest(s) with respect to such OHTE Subsidiary was
<PAGE>
68
admitted to the Partnership) were sold for cash at a price equal to their fair
market value determined as of the date that the Act of Insolvency was committed
or the dissolution occurred, as the case may be, the proceeds of such sale were
distributed to the partners of the Underlying Partnership in accordance with the
provisions of the Underlying Partnership Agreement, the Net Profit or Net Loss
associated with such sale were allocated pursuant to Article 9 and the amounts
distributed to the Partnership by the Underlying Partnership were then
distributed as provided in Article 10 (except that such proceeds shall be deemed
reduced by the reasonably estimated amount of any contingent or other
unliquidated liability then known to the Partnership (to the extent associated
with the Hotel Interest in question, if the Non-Qualified Partner is an OHTE
Subsidiary), it being agreed that if such amount subsequently proves to be
excessive the excess shall be deemed a retroactive increase in such proceeds and
an appropriate payment shall be made to the Non-Qualified Partner)). The "fair
market value" of the property and assets of the Underlying Partnership for
purposes of this Section 15.4 shall be determined pursuant to the procedure set
forth in Article 23. The purchasing Partner (the "Purchasing Partner") shall
------------------
have the right to commence such procedure at any time after the event giving
rise to its rights under this Section 15.3, and the costs and expenses of such
procedure shall be paid by the Non-Qualified Partner (unless such Partner is a
Non-Qualified Partner by reason of committing an Act of Insolvency, in which
case the provisions of the third sentence of Section 23.1 and Section 23.7 shall
apply with respect to the payment of such costs and expenses). The closing of
the sale of the Non-Qualified Partner's Partnership Interest shall take place at
the office of the Purchasing Partner, on a date specified in the Purchasing
Partner's notice, which date shall be not less than 30 days nor more than 90
days after the date of the determination of the Purchase Price. At the closing,
the Non-Qualified Partner or its legal representative(s) or successor shall
assign and transfer its entire Partnership Interest, free and clear of all
liens, encumbrances and adverse claims, to the Purchasing Partner or its
designee or designees against receipt of the Purchase Price. The Purchase Price
shall be paid by the Purchasing Partner to the Non-Qualified Partner or its
legal representative(s) or successor, or to any other Person to whom the
Purchasing Partner shall be directed to pay the same by a court of competent
jurisdiction, by good or certified official bank check or by wire transfer of
immediately available federal funds. Opco GP and Opco LP hereby irrevocably
constitute and appoint Oak Hill GP, and each Oak Hill Partner hereby irrevocably
constitutes and appoints Opco GP, as the appointing parties' attorney-in-fact,
coupled with an interest, to execute, acknowledge and deliver all instruments
and documents necessary to effectuate the foregoing transfer and assignment in
the event the appointing Partner becomes a Non-Qualified Partner and the
Purchasing Partner exercises its rights set forth under this Section 15.3.
Notwithstanding anything to the contrary contained herein, if, at the time
<PAGE>
69
of the closing of the sale of the Non-Qualified Partner's Partnership Interest,
there are any outstanding Default Loans owing by the Non-Qualified Partner, then
the sale proceeds to which the Non-Qualified Partner would otherwise be entitled
shall instead, to the extent of the outstanding principal balance of, and
accrued interest on, such Default Loans, be paid to the Person constituting the
Non-Defaulting Partner in proportion to the respective amounts of principal and
interest owed to each such Person.
15.4 As used in this Agreement, an "Act of Insolvency" shall be
-----------------
deemed to have occurred in the event a Partner commences voluntary proceedings
under any Chapter of the Federal Bankruptcy Code, or for similar relief under
any state insolvency law, or if there is commenced against such Partner any
involuntary proceeding under any Chapter of the Federal Bankruptcy Code or for
similar relief under any state insolvency law and such proceeding is not
dismissed or stayed within 60 days thereafter or, if stayed, is not dismissed
prior to the expiration of the stay.
15.5 In the event that a Partner becomes a Non-Qualified Partner,
then from and after the date of the applicable Act of Insolvency, dissolution or
failure to satisfy a condition, as the case may be, (a) if such Partner is a
General Partner or OHTE, such Partner shall no longer have any of the
responsibilities, duties, powers or rights granted to it in this Agreement (and
the other of them shall have such responsibilities, duties, powers and
responsibilities) and shall no longer have the right to appoint a
Representative, and (b) such Partner shall not, unless required by another
Partner which is not its Affiliate, participate in the meetings and activities
described in Sections 13.4 and 13.5.
15.6 Upon the closing of a sale by a Partner of its Partnership
Interest pursuant to the foregoing provisions of this Article 15, the selling
Partner shall be relieved of all of its obligations under this Agreement
thereafter accruing. If the selling Partner shall default in its obligation to
sell its Partnership Interest under this Article and such default shall continue
for 30 days, such Partner's only remaining right under this Agreement shall be
to receive the purchase price for its Partnership Interest, based, not on the
fair market value of the Underlying Partnership's assets, but on the lower of
(x) 80% of such fair market value and (y) the amount invested by the Underlying
Partnership in such assets.
15.7 For purposes of this Article 15: (i) if Opco GP or Opco LP
shall become a Non-Qualified Partner, the other of them shall also be deemed to
be a Non-Qualified Partner; and (ii) if any Oak Hill Partner shall become a Non-
Qualified
<PAGE>
70
Partner, the other Oak Hill Partners shall also be deemed to be Non-Qualified
Partners.
16. Further Assurances. Each party to this Agreement agrees to
------------------
execute, acknowledge, deliver, file and record such further certificates,
amendments, instruments and documents, and to do all such other acts and things,
as may be required by law, or as may be necessary or advisable, to carry out the
intent and purposes of this Agreement.
17. Notices.
-------
17.1 Unless otherwise specified in this Agreement, all notices,
consents, demands, elections, requests or other communications (collectively
"notices") which any Partner may desire or be required to give hereunder shall
-------
be in writing and shall be given by mailing the same by registered or certified
mail, return receipt requested, or by Federal Express or other reputable air
courier service, postage prepaid, return receipt requested, or by delivering the
same by hand, or by facsimile, addressed as follows:
17.1.1 To any Oak Hill Partner (or OHTE, if it is not then
a Partner) at its address first set forth above, Attention: Bradford Bernstein,
with a copy given simultaneously in the manner aforesaid to each of (i) Oak Hill
Capital Management, Inc., Park Avenue Tower, 65 East 55th Street, 32nd Floor,
New York, New York 10022, Attention: Bradford Bernstein, facsimile number (212)
754-5685, and (ii) O'Sullivan, Graev & Karabell LLP, 30 Rockefeller Plaza, New
York, New York 10112, Attention: Brad Okun, facsimile number (212) 408-2420, or
at such other address or addresses or facsimile number or to the attention of
such other Person or Persons as may be designated by the applicable Partner by
notice given to the other Partners as provided in this Article.
17.1.2 To Opco GP or Opco LP at their address first set
forth above, Attention: Christopher L. Bennett, facsimile number (202) 965-4445,
with a copy given simultaneously in the manner aforesaid to DeCampo, Diamond &
Ash, 805 Third Avenue, New York, New York 10022, Attention: William H. Diamond,
Esq., facsimile number (212) 758-1728, or at such other address or addresses or
facsimile number or to the attention of such other Person or Persons as may be
designated by the applicable Partner by notice given to the other Partners as
provided in this Article.
17.1.3 To any Person who hereafter becomes a Partner
<PAGE>
71
(other than an OHTE Subsidiary) at such address or addresses or facsimile number
as may be designated by it by notice given to the other Partners as provided in
this Article.
17.2 All notices given as in this Article provided shall be
deemed to have been given or served on the third business day after the date so
mailed (in the case of notices mailed by registered or certified mail) or on the
day sent (in the case of notices by facsimile; provided if such notice is sent
by facsimile on a day which is not a business day in the place of receipt or
after business hours on such a business day, the same shall be deemed to have
been given on the next such business day) or upon delivery thereof (in all other
cases), with failure to accept delivery to constitute delivery for this purpose.
17.3 Notwithstanding the provisions of Section 17.1, routine
communications such as distribution checks or annual statements of the
Partnership may be sent by first-class mail, postage prepaid.
18. Captions. All Section and article titles or captions contained
--------
in this Agreement and the table of contents, if any, are for convenience only
and shall not be deemed a part of this Agreement.
19. Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall constitute an original and all of which, when taken
together, shall constitute one agreement.
20. Governing Law. This Agreement is made pursuant to the provisions
-------------
of the Act and shall be construed accordingly.
21. Successors and Assigns. This Agreement shall be binding upon the
----------------------
parties hereto and their respective successors and permitted assigns and shall
inure to the benefit of the parties hereto and their respective successors and
permitted assigns, but shall not inure to the benefit of, or be enforceable by,
any other Person.
22. Invalidity. If any provision or any portion of any provision of
----------
this Agreement, or the application of any such provision or any portion thereof
to any Person or circumstance, shall be held invalid or unenforceable, the
remaining portion of such provision and the remaining provisions of this
Agreement, and the application of such provision or such portion to Persons or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby.
<PAGE>
72
23. Fair Market Value. The following procedure shall govern the
-----------------
determination of the fair market value of the Hotel Interests then owned by the
Underlying Partnership (which term shall mean, for purposes of this Article 23,
the Hotel Interest or Interests with respect to which any OHTE Subsidiary which
is a Non-Qualified Partner was admitted to the Partnership) for purposes of
Article 15. Such determination shall be made as of the date a Partner commits
an Act of Insolvency:
23.1 The General Partners shall each make good faith efforts to
agree on the fair market value of the Hotel Interests. If, despite such
efforts, they are unable to agree on such fair market value within 10 days after
the date (the "FMV Date") the Purchasing Partner learns of the Act of Insolvency
--------
and so notifies the Non-Qualified Partner or its legal representative, the
General Partners shall make good faith efforts to agree on the appointment of a
disinterested Person who is an MAI appraiser with at least 10 years' experience
in appraising Hotels comparable in size and quality to the applicable Hotel(s)
(such a Person, an "Appraiser") as an appraiser for purposes of this Article 23.
---------
If the General Partners agree on the appointment of an Appraiser, the fair
market value of the Hotels and Hotel Equity Interests in question shall be
determined pursuant to Sections 23.4, 23.5 and 23.6, and each of the General
Partners shall, subject to the parenthetical clause of the first sentence of
this Article 23, be responsible for 50% of the costs of the appraisal procedure.
If the General Partners are unable so to agree within 20 days after the FMV
Date, the fair market value of the Hotel Interest(s) in question shall, at
either party's election, be determined pursuant to Sections 23.2, 23.3, 23.4,
23.5, 23.6 and 23.7.
23.2 If the General Partners are unable to agree on the
appointment of an Appraiser pursuant to Section 23.1 within the 20-day period
provided for therein, each of the General Partners shall have the right
thereafter to appoint an Appraiser and, having made such appointment, shall
notify the other as to the name of the Person so appointed. Each such Appraiser
shall then make its own determination of such fair market value and if, with 45
days after both Appraisers have been appointed, such two Appraisers cannot reach
agreement on what such fair market value should be, they shall appoint a third
Appraiser who shall make his, her or its own determination of such fair market
value, provided that:
(i) if either General Partner shall fail to designate
an Appraiser within 15 days after being notified of the other party's
designation of an Appraiser, the Appraiser chosen by the notifying General
Partner shall alone proceed to determine fair market value, and
<PAGE>
73
(ii) if the two Appraisers shall be unable to agree,
within 45 days after both have been appointed, on the appointment of a
third Appraiser, they shall give written notice of such failure to agree to
the General Partners and, if such Partners fail to agree on the selection
of a third Appraiser within fifteen (15) days after the Appraisers
appointed by them give notice as aforesaid, then either of such Partners,
upon written notice to the other, may apply for appointment of a third
Appraiser to the American Arbitration Association.
23.3 If a third Appraiser shall have been appointed as above
provided, then (i) if the fair market value determined by such third Appraiser
shall exceed the higher of the fair market value determinations of the first and
second Appraisers or shall be less than the lower of such fair market value
determinations, then the determination of such third Appraiser shall be
disregarded and the closer in amount of the other two appraisals to such third
appraisal shall instead constitute said fair market value and (ii) if the fair
market value determined by such third Appraiser shall neither exceed the higher
nor be less than the lower of the fair market value determinations of the first
and second appraisers, the fair market value determination of such third
Appraiser shall constitute said fair market value.
23.4 Each of the General Partners shall be entitled to present
evidence and arguments to the Appraiser(s). Each such Partner shall use
reasonable efforts to expedite the completion of the appraisal procedure.
23.5 The determination of the Appraisers or the Appraiser
acting alone as above provided shall be conclusive and binding upon the
Partnership. The Appraisers or Appraiser, as the case may be, shall be required
to give written notice to the Partners stating their or his or her
determination, and shall furnish to each Partner a signed copy of such
determination.
23.6 Notwithstanding anything to the contrary contained in this
Agreement, if the fair market value of any Hotel Debt is to be determined
pursuant to this Article 23, the Appraiser(s) shall determine the fair market
value of the Hotel Interest(s) that serve as security therefor pursuant to the
procedure set forth above, and the fair market value of such Hotel Debt shall be
deemed to be the lesser of (a) the fair market value of such Hotel Interest(s),
as determined by the procedure set forth above and after taking into account all
secured debt or other liens covering such Hotel Interest(s) (or the
<PAGE>
74
underlying Hotels) superior to such Hotel Debt and (b) the sum of (i) the
outstanding principal amount of, and accrued interest on, such Hotel Debt and
(ii) if the terms of such Hotel Debt include provisions for any so-called
"equity kickers" or "equity participations," the amount that would be paid to
the Partnership pursuant to said provisions if such Hotel Interest(s) were sold
for their fair market value, as determined as set forth above.
23.7 If the appraisal procedure described in Sections 23.2,
23.3, 23.4, 23.5 and 23.6 is used, each of the General Partners shall pay the
costs and expenses of the Appraiser appointed by it and one-half of the other
expenses of the appraisal procedure incurred hereunder.
24. Special Purpose Entity Provisions. Notwithstanding any other
---------------------------------
provisions of this Agreement, for so long as (i) the Partnership is a party to
the documents (the "Loan Documents") evidencing and securing the Credit Facility
or is otherwise obligated to take any action under the terms of the Loan
Documents, or (ii) any obligations are outstanding under the Credit Facility,
the Partnership shall not:
24.1 Except as permitted under the Loan Documents, own any
assets or property other than its interest in the Underlying Partnership, its
interest as lessee under the Operating Leases and other property that is
encumbered by the security interests securing the Credit Facility;
24.2 Engage in any business other than as described in Article
5 hereof;
24.3 Except as permitted under the Loan Documents, enter into
any contract or agreement with any Affiliate of the Partnership, except upon
terms and conditions that are intrinsically fair and no less favorable to the
Partnership than those that would be available in a comparable arms'-length
transaction with unrelated third parties;
24.4 Except as permitted under the Loan Documents, (i) fail to
pay solely from its assets all obligations of any kind incurred by it or (ii)
pay from its assets the obligations of any other person;
24.5 Incur any debt, secured or unsecured, direct or contingent
(including guaranteeing any obligation), other than (i) the debt evidenced by
the Loan Documents, (ii) Voluntary Loans, (iii) Priority Loans and (iv) other
debt
<PAGE>
75
permitted pursuant to the Loan Documents,;
24.6 Except as permitted under the Loan Documents, make any
loans or advances to any third party (including any affiliate) or hold evidence
of indebtedness issued by any third party, or acquire obligations or securities
of its affiliates; provided, however, that the Partnership may hold government-
backed, other investment grade securities and repurchase obligations with a term
of not more than one year with respect to such securities;
24.7 Become insolvent or fail to pay its debts and liabilities
(including, as applicable, shared personnel and overhead expenses) from its
assets as the same shall become due;
24.8 Fail to observe limited partnership formalities and
preserve its existence, including by paying the salaries of its own employees,
if any (or paying a proportionate share of the salary of any employee of any
Affiliate who performs work for both the Partnership and such Affiliate), or,
except as otherwise permitted under the Loan Documents, amend, modify or
otherwise change the other organizational documents of the Partnership;
24.9 Except as required under the Loan Documents, fail to (i)
maintain all of its books, records, financial statements and bank accounts
separate from those of its Affiliates (except that the Partnership may be
included in a consolidated financial statement for the Partnership, its
subsidiaries and the Partnership's controlling parties (the "Controlling
Parties") filed with the Securities Exchange Commission, which consolidated
financial statement shall indicate that Partnership, such subsidiaries and the
Controlling Parties are separate legal entities and that the assets and
liabilities of the Partnership are intended to be available only to creditors of
the Partnership), (ii) file its own tax returns and pay the taxes shown thereon
(except that the Partnership, its subsidiaries and the Controlling Parties may
file consolidated or combined federal, state and city tax returns, which shall
provide that the Partnership, the such subsidiaries and the Controlling Parties
are separate legal entities and pay their respective proportionate shares of the
taxes shown on such returns), or (iii) maintain its books, records, resolutions
and agreements as official records;
24.10 Fail to (i) hold itself out to the public as a legal
entity separate and distinct from any other entity (including any Affiliate of
the Partnership), (ii) correct any known misunderstanding regarding its status
as a separate entity,
<PAGE>
76
(iii) conduct business solely in its own name, (iv) not identify itself or any
of its affiliates as a division or part of the other or (v) maintain and utilize
separate stationery, invoices and checks;
24.11 Fail to maintain adequate capital for the normal
obligations reasonably foreseeable in a business of its size and character and
in light of its contemplated business operations;
24.12 Seek or effect the liquidation, dissolution, winding up,
consolidation or merger, in whole or in part, of the Partnership;
24.13 Commingle its funds or other assets with the assets of any
affiliate of the Partnership or any other person or entity;
24.14 Guarantee or become obligated for the debts of any other
entity or person or hold itself out to be responsible for the debts of another
person or entity, other than (i) with respect to the loan provided for in the
Credit Facility, and (ii) as otherwise permitted under the Loan Documents;
24.15 Share any common logo with or hold itself out as or be
considered as a department or division of (i) any, principal, member or
affiliate of the Partnership, (ii) any Affiliate of a principal or member of the
Partnership, or (iii) any other person or entity;
24.16 Fail to allocate fairly and reasonably any overhead
expenses that are shared with an Affiliate, including paying for office space
and services performed by any employee of an Affiliate, and maintain a principal
executive and administrative office through which its business is conducted
separate from that of any Affiliate; provided, however, that the Partnership and
-------- -------
any of its Affiliates may have offices in the same location provided there is a
fair and appropriate allocation of overhead costs, if any, among the Partnership
and/or any such affiliates and each of the Partnership and any such Affiliates
bear its fair share of such costs;
24.17 Pledge its assets for the benefit of any other person or
entity, other than with respect to (i) the loan provided for in the Credit
Facility, and (ii) except as otherwise permitted under the Loan Documents;
24.18 Fail to maintain a sufficient number of employees in light
<PAGE>
77
of its contemplated business operations (taking in account any management or
similar agreement or operating lease entered into by the Partnership);
24.19 Fail to take title to any personal or real property of the
Partnership other than in the name of the Partnership;
24.20 Without the consent of both General Partners, file or
consent to the filing of any petition, either voluntary or involuntary, to take
advantage of any applicable insolvency, bankruptcy, liquidation or
reorganization statute, or make an assignment for the benefit of creditors; or
24.21 Without the consent of both General Partners, take any of
the following actions:
24.21.1 file or consent to the filing of any bankruptcy,
insolvency or reorganization case or proceeding; institute any proceedings under
any applicable insolvency law or otherwise seek any relief under any laws
relating to the relief from debts or the protection of debtors generally;
24.21.2 seek or consent to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator, custodian or any similar official
for the Partnership or a substantial portion of its properties;
24.21.3 make any assignment for the benefit of the
Partnership's creditors;
24.21.4 amend the organizational documentation of the
Partnership in any manner that does not comply with each of the covenants
contained in this Article 29; or
24.21.5 take any action in furtherance of any of the
foregoing.
<PAGE>
78
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
MIP GP, LLC
By: MeriStar H & R Operating Company, L.P.,
its Manager
By: MeriStar Hotels & Resorts, Inc.,
its general partner
By:
Name:
Title:
MIP GEN PAR, LLC
By: Oak Hill Capital Partners, L.P., its
Manager
By: OHCP GenPar, L.P., its general
partner
By: OHCP MGP, LLC, its general
partner
By: ___________________________
,
a member
OAK HILL CAPITAL MANAGEMENT PARTNERS, L.P.
By: OHCP Gen Par, L.P., its general partner
By: OHCP MGP, LLC, its general partner
<PAGE>
79
By: _________________________________
Name:
Title:
, a member
OAK HILL CAPITAL PARTNERS, L.P., in
its capacities as "OHTE" and "Oak
Hill LP" hereunder
By: OHCP Gen Par, L.P., its
general partner
By: OHCP MGP, LLC, its general partner
By _______________________________
, a member
MERISTAR H & R OPERATING COMPANY, L.P.
By: MeriStar Hotels & Resorts, Inc.,
its general partner
By: __________________________________
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 7,806
<SECURITIES> 0
<RECEIVABLES> 81,451
<ALLOWANCES> 3,232
<INVENTORY> 7,139
<CURRENT-ASSETS> 102,537
<PP&E> 8,119
<DEPRECIATION> 1,426
<TOTAL-ASSETS> 274,378
<CURRENT-LIABILITIES> 143,642
<BONDS> 57,642
0
0
<COMMON> 255
<OTHER-SE> 44,267
<TOTAL-LIABILITY-AND-EQUITY> 274,378
<SALES> 0
<TOTAL-REVENUES> 325,838
<CGS> 0
<TOTAL-COSTS> 118,868
<OTHER-EXPENSES> 206,518
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,226
<INCOME-PRETAX> (774)
<INCOME-TAX> (309)
<INCOME-CONTINUING> (465)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (465)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
