<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D**
Under the Securities Exchange Act of 1934
(Amendment No. 1)*
MeriStar Hotels & Resorts, Inc.
- --------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, Par Value $0.01 Per Share
- --------------------------------------------------------------------------------
(Title of Class of Securities)
589988104
- --------------------------------------------------------------------------------
(CUSIP Number)
Brad R. Okun, Esq.
O'Sullivan, Graev & Karabell, LLP
30 Rockefeller Plaza, 41st Floor
New York, New York 10112
(212) 408-2400
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
April 15, 1999
- --------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check
the following box. / /
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Section 240.13d-7 for other
parties to whom copies of this statement are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
**The total number of shares of Stock reported herein is 5,039,593 shares, which
constitutes approximately 18.4% of the total number of shares outstanding. All
ownership percentages set forth herein assume that there are 27,343,582 shares
outstanding.
<PAGE>
SCHEDULE 13D
Issuer: MeriStar Hotels & Resorts, Inc. CUSIP Number: 589988104
1. Names of Reporting Persons.
I.R.S. Identification Nos. of above persons (entities only).
FW Hospitality, L.P.
2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) / /
(b) /X/
3. SEC Use Only
4. Source of Funds (See Instructions) 00 - Contributions From Partners
5. Check if Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e)
6. Citizenship or Place of Organization Delaware
Number of 7. Sole Voting Power 1,772,727(1)
Shares
Beneficially 8. Shared Voting Power 0
Owned by Each
Reporting Person 9. Sole Dispositive Power 1,772,727(1)
With
10. Shared Dispositive Power 0
11. Aggregate Amount Beneficially Owned by Each Reporting Person 764,067
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions)
13. Percent of Class Represented by Amount in Row (11) 2.8%
14. Type of Reporting Person (See Instructions)
PN
(1) Power is exercised through its general partner, Group III 31, L.L.C.
Page 2 of 37
<PAGE>
SCHEDULE 13D
Issuer: MeriStar Hotels & Resorts, Inc. CUSIP Number: 589988104
1. Names of Reporting Persons.
I.R.S. Identification Nos. of above persons (entities only).
Arbor REIT, L.P.
2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) / /
(b) /X/
3. SEC Use Only
4. Source of Funds (See Instructions) 00 - Contributions From Partners
5. Check if Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e)
6. Citizenship or Place of Organization Delaware
Number of 7. Sole Voting Power 45,455(1)
Shares
Beneficially Owned 8. Shared Voting Power 0
Owned by Each
Reporting Person 9. Sole Dispositive Power 45,455(1)
With
10. Shared Dispositive Power 0
11. Aggregate Amount Beneficially Owned by Each Reporting Person 764,067
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions)
13. Percent of Class Represented by Amount in Row (11) 2.8%
14. Type of Reporting Person (See Instructions)
PN
(1) Power is exercised through its general partner, Group Investors, L.L.C.
Page 3 of 37
<PAGE>
SCHEDULE 13D
Issuer: MeriStar Hotels & Resorts, Inc. CUSIP Number: 589988104
1. Names of Reporting Persons.
I.R.S. Identification Nos. of above persons (entities only).
MHX Investors, L.P.
2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) / /
(b) /X/
3. SEC Use Only
4. Source of Funds (See Instructions) 00 - Contributions From Partners
5. Check if Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e)
6. Citizenship or Place of Organization Delaware
Number of 7. Sole Voting Power 764,066(1)
Shares
Beneficially 8. Shared Voting Power 0
Owned by Each
Reporting Person 9. Sole Dispositive Power 764,066(1)
With
10. Shared Dispositive Power 0
11. Aggregate Amount Beneficially Owned by Each Reporting Person 764,066
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions)
13. Percent of Class Represented by Amount in Row (11) 2.8%
14. Type of Reporting Person (See Instructions)
PN
(1) Power is exercised through its general partner, FW Group Genpar, Inc.
Page 4 of 37
<PAGE>
SCHEDULE 13D
Issuer: MeriStar Hotels & Resorts, Inc. CUSIP Number: 589988104
1. Names of Reporting Persons.
I.R.S. Identification Nos. of above persons (entities only).
Cherwell Investors, Inc.
2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) / /
(b) /X/
3. SEC Use Only
4. Source of Funds (See Instructions) Not Applicable
5. Check if Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e)
6. Citizenship or Place of Organization Delaware
Number of 7. Sole Voting Power 61,912(1)
Shares
Beneficially 8. Shared Voting Power 0
Owned by Each
Reporting Person 9. Sole Dispositive Power 61,912(1)
With
10. Shared Dispositive Power 0
11. Aggregate Amount Beneficially Owned by Each Reporting Person 61,912
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions)
13. Percent of Class Represented by Amount in Row (11) 0.2%
14. Type of Reporting Person (See Instructions)
CO
(1) Power is exercised through its sole stockholder, Acadia Partners, L.P.
Page 5 of 37
<PAGE>
SCHEDULE 13D
Issuer: MeriStar Hotels & Resorts, Inc. CUSIP Number: 589988104
1. Names of Reporting Persons.
I.R.S. Identification Nos. of above persons (entities only).
Group 31, Inc.
2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) / /
(b) /X/
3. SEC Use Only
4. Source of Funds (See Instructions) Not Applicable
5. Check if Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e)
6. Citizenship or Place of Organization Texas
Number of 7. Sole Voting Power 4,067(1)
Shares
Beneficially 8. Shared Voting Power 0
Owned by Each
Reporting Person 9. Sole Dispositive Power 4,067(1)
With
10. Shared Dispositive Power 0
11. Aggregate Amount Beneficially Owned by Each Reporting Person 4,067
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions)
13. Percent of Class Represented by Amount in Row (11) 0.1%
14. Type of Reporting Person (See Instructions)
CO
(1) Power is exercised by its president and sole stockholder, J. Taylor Crandall
Page 6 of 37
<PAGE>
SCHEDULE 13D
Issuer: MeriStar Hotels & Resorts, Inc. CUSIP Number: 589988104
1. Names of Reporting Persons.
I.R.S. Identification Nos. of above persons (entities only).
MC Investment Corporation
2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) / /
(b) /X/
3. SEC Use Only
4. Source of Funds (See Instructions) Not Applicable
5. Check if Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e)
6. Citizenship or Place of Organization Delaware
Number of 7. Sole Voting Power 45(1)
Shares
Beneficially 8. Shared Voting Power 0
Owned by Each
Reporting Person 9. Sole Dispositive Power 45(1)
With
10. Shared Dispositive Power 0
11. Aggregate Amount Beneficially Owned by Each Reporting Person 45
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions)
13. Percent of Class Represented by Amount in Row (11) 0.1%
14. Type of Reporting Person (See Instructions)
CO
(1) Power is exercised by its sole stockholder, Penobscot Partners, L.P.
Page 7 of 37
<PAGE>
SCHEDULE 13D
Issuer: MeriStar Hotels & Resorts, Inc. CUSIP Number: 589988104
1. Names of Reporting Persons.
I.R.S. Identification Nos. of above persons (entities only).
Penobscot Partners, L.P.
2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) / /
(b) /X/
3. SEC Use Only
4. Source of Funds (See Instructions) Not Applicable
5. Check if Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e)
6. Citizenship or Place of Organization Delaware
Number of 7. Sole Voting Power 87,848(1)(2)
Shares
Beneficially 8. Shared Voting Power 0
Owned by Each
Reporting Person 9. Sole Dispositive Power 87,848(1)(2)
With
10. Shared Dispositive Power 0
11. Aggregate Amount Beneficially Owned by Each Reporting Person 87,848(2)
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions)
13. Percent of Class Represented by Amount in Row (11) 0.3%
14. Type of Reporting Person (See Instructions)
PN
(1) Power is exercised by its sole general partner, PTJ Merchant Banking
Partners, L.P.
(2) Solely in its capacity as the sole stockholder of MC Investment Corporation
with respect to 45 shares of Stock.
Page 8 of 37
<PAGE>
SCHEDULE 13D
Issuer: MeriStar Hotels & Resorts, Inc. CUSIP Number: 589988104
1. Names of Reporting Persons.
I.R.S. Identification Nos. of above persons (entities only).
PTJ Merchant Banking Partners, L.P.
2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) / /
(b) /X/
3. SEC Use Only
4. Source of Funds (See Instructions) Not Applicable
5. Check if Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e)
6. Citizenship or Place of Organization Delaware
Number of 7. Sole Voting Power 204,514(1)(2)
Shares
Beneficially 8. Shared Voting Power 0
Owned by Each
Reporting Person 9. Sole Dispositive Power 204,514(1)(2)
With
10. Shared Dispositive Power 0
11. Aggregate Amount Beneficially Owned by Each Reporting Person 204,514(2)
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions)
13. Percent of Class Represented by Amount in Row (11) 0.8%
14. Type of Reporting Person (See Instructions)
PN
(1) Power is exercised through its managing general partner, PTJ, Inc.
(2) Solely in its capacity as the sole general partner of Penobscot Partners,
L.P. with respect to 87,848 shares of Stock.
Page 9 of 37
<PAGE>
SCHEDULE 13D
Issuer: MeriStar Hotels & Resorts, Inc. CUSIP Number: 589988104
1. Names of Reporting Persons.
I.R.S. Identification Nos. of above persons (entities only).
J. Taylor Crandall
2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) / /
(b) /X/
3. SEC Use Only
4. Source of Funds (See Instructions) PF
5. Check if Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e)
6. Citizenship or Place of Organization USA
Number of 7. Sole Voting Power 1,030,493(1)
Shares
Beneficially 8. Shared Voting Power 0
Owned by Each
Reporting Person 9. Sole Dispositive Power 1,030,493(1)
With
10. Shared Dispositive Power 0
11. Aggregate Amount Beneficially Owned by Each Reporting Person 1,030,493(1)
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions)
13. Percent of Class Represented by Amount in Row (11) 3.8%
14. Type of Reporting Person (See Instructions)
IN
(1) Solely in his capacity as (i) president and sole shareholder of Acadia MGP,
Inc., in its capacity as the controlling entity of Acadia Partners, L.P.,
with respect to 61,912 shares of Stock owned directly by Cherwell Investors,
Inc., (ii) president and sole shareholder of Group 31, Inc. with respect to
4,067 shares of Stock, (iii) president and sole stockholder of PTJ, Inc., in
its capacity as general partner of PTJ Merchant Banking Partners, L.P., with
respect to 204,514 shares of Stock, and (iv) sole member of Group III 31,
L.L.C., in its capacity as general partner of FW Hospitality, L.P., with
respect to 764,067 shares of Stock.
Page 10 of 37
<PAGE>
SCHEDULE 13D
Issuer: MeriStar Hotels & Resorts, Inc. CUSIP Number: 589988104
1. Names of Reporting Persons.
I.R.S. Identification Nos. of above persons (entities only).
Capital Partnership
2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) / /
(b) /X/
3. SEC Use Only
4. Source of Funds (See Instructions) Not Applicable
5. Check if Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e)
6. Citizenship or Place of Organization Texas
Number of 7. Sole Voting Power 45,754(1)
Shares
Beneficially 8. Shared Voting Power 0
Owned by Each
Reporting Person 9. Sole Dispositive Power 45,754(1)
With
10. Shared Dispositive Power 0
11. Aggregate Amount Beneficially Owned by Each Reporting Person 45,754(1)
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions)
13. Percent of Class Represented by Amount in Row (11) 0.2%
14. Type of Reporting Person (See Instructions)
PN
(1) Power is exercised by its managing partner, Margaret Lee Bass 1980 Trust.
Page 11 of 37
<PAGE>
SCHEDULE 13D
Issuer: MeriStar Hotels & Resorts, Inc. CUSIP Number: 589988104
1. Names of Reporting Persons.
I.R.S. Identification Nos. of above persons (entities only).
Keystone, Inc.
2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) / /
(b) /X/
3. SEC Use Only
4. Source of Funds (See Instructions) Not Applicable
5. Check if Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e)
6. Citizenship or Place of Organization Texas
Number of 7. Sole Voting Power 193,367(1)
Shares
Beneficially 8. Shared Voting Power 0
Owned by Each
Reporting Person 9. Sole Dispositive Power 193,367(1)
With
10. Shared Dispositive Power 0
11. Aggregate Amount Beneficially Owned by Each Reporting Person 193,367
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions)
13. Percent of Class Represented by Amount in Row (11) 0.7%
14. Type of Reporting Person (See Instructions)
CO
(1) Power is exercised through its president and sole director, Robert M. Bass.
Page 12 of 37
<PAGE>
SCHEDULE 13D
Issuer: MeriStar Hotels & Resorts, Inc. CUSIP Number: 589988104
1. Names of Reporting Persons.
I.R.S. Identification Nos. of above persons (entities only).
Robert M. Bass
2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) / /
(b) /X/
3. SEC Use Only
4. Source of Funds (See Instructions) PF
5. Check if Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e)
6. Citizenship or Place of Organization USA
Number of 7. Sole Voting Power 270,885(1)
Shares
Beneficially 8. Shared Voting Power 0
Owned by Each
Reporting Person 9. Sole Dispositive Power 270,885(1)
With
10. Shared Dispositive Power 0
11. Aggregate Amount Beneficially Owned by Each Reporting Person 270,885(1)
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions)
13. Percent of Class Represented by Amount in Row (11) 1.0%
14. Type of Reporting Person (See Instructions)
IN
(1) Soley in his capacity as president and sole director of Keystone, Inc.
with respect to 193,367 shares of Stock.
Page 13 of 37
<PAGE>
SCHEDULE 13D
Issuer: MeriStar Hotels & Resorts, Inc. CUSIP Number: 589988104
1. Names of Reporting Persons.
I.R.S. Identification Nos. of above persons (entities only).
Oak Hill Capital Partners, L.P.
2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) / /
(b) /X/
3. SEC Use Only
4. Source of Funds (See Instructions) OO-Contributions from Partners
5. Check if Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e)
6. Citizenship or Place of Organization Delaware
Number of 7. Sole Voting Power 1,772,728(1)
Shares
Beneficially 8. Shared Voting Power 0
Owned by Each
Reporting Person 9. Sole Dispositive Power 1,772,728(1)
With
10. Shared Dispositive Power 0
11. Aggregate Amount Beneficially Owned by Each Reporting Person 1,772,728(1)
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions)
13. Percent of Class Represented by Amount in Row (11) 6.5%
14. Type of Reporting Person (See Instructions)
PN
(1) Power is exercised through its general partner, OHCP GenPar, L.P.
Page 14 of 37
<PAGE>
SCHEDULE 13D
Issuer: MeriStar Hotels & Resorts, Inc. CUSIP Number: 589988104
1. Names of Reporting Persons.
I.R.S. Identification Nos. of above persons (entities only).
Oak Hill Capital Management Partners, L.P.
2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) / /
(b) /X/
3. SEC Use Only
4. Source of Funds (See Instructions) OO-Contributions from Partners
5. Check if Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e)
6. Citizenship or Place of Organization Delaware
Number of 7. Sole Voting Power 45,454(1)
Shares
Beneficially 8. Shared Voting Power 0
Owned by Each
Reporting Person 9. Sole Dispositive Power 45,454(1)
With
10. Shared Dispositive Power 0
11. Aggregate Amount Beneficially Owned by Each Reporting Person 45,454(1)
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions)
13. Percent of Class Represented by Amount in Row (11) 0.2%
14. Type of Reporting Person (See Instructions)
PN
(1) Power is exercised through its general partner, OHCP GenPar, L.P.
Preliminary Note.
The information contained herein has been adjusted to reflect the
addition of two new members to the group of reporting persons.
Page 15 of 37
<PAGE>
SCHEDULE 13D
Issuer: MeriStar Hotels & Resorts, Inc. CUSIP Number: 589988104
Item 1. SECURITY AND ISSUER.
This statement relates to shares of common stock, par value $0.01 per share
(the "Stock"), of MeriStar Hotels & Resorts, Inc. (the "Issuer"). The principal
executive offices of the Issuer are located at 1010 Wisconsin Avenue NW,
Washington, D.C. 20007.
Item 2. IDENTITY AND BACKGROUND.
The response to Item 2 is amended in its entirety to read as follows:
(a) Pursuant to Rule 13d-1(a) of Regulation 13D-G of the General Rules and
Regulations under the Act, the undersigned hereby file this Schedule 13D
Statement on behalf of FW Hospitality, L.P., a Delaware limited partnership
("Hospitality"), Arbor REIT, L.P., a Delaware limited partnership ("Arbor"), MHX
Investors, L.P., a Delaware limited partnership ("MHX"), Cherwell Investors,
Inc., a Delaware corporation ("Cherwell"), Group 31, Inc., a Texas corporation
("Group 31"), MC Investment Corporation, a Delaware corporation ("MCI"),
Penobscot Partners, L.P., a Delaware limited partnership ("Penobscot"), PTJ
Merchant Banking Partners, L.P., a Delaware limited partnership ("PTJ"
Merchant"), J. Taylor Crandall ("Crandall"), Capital Partnership, a Texas
general partnership ("Capital"), Keystone, Inc., a Texas corporation
("Keystone"), Robert M. Bass ("R. Bass"), Oak Hill Capital Partners, L.P., a
Delaware limited partnership ("OHCP"), and Oak Hill Capital Management Partners,
L.P., a Delaware limited partnership ("OHCMP"). Hospitality, Arbor, MHX,
Cherwell, Group 31, MCI, Penobscot, PTJ Merchant, Crandall, Capital, Keystone,
R. Bass, OHCP, and OHCMP are sometimes hereinafter collectively referred to as
the "Reporting Persons." The Reporting Persons are making this single, joint
filing because they may be deemed to constitute a "group" within the meaning of
Section 13(d)(3) of the Act, although neither the fact of this filing nor
anything contained herein shall be deemed to be an admission by the Reporting
Persons that a group exists. Additionally, pursuant to Instruction C of Schedule
13D, information is included herein with respect to the following persons
(collectively, "Item 2 Persons"), Group III 31, L.L.C., a Delaware limited
liability company ("Group III"), Group Investors, L.L.C., a Delaware limited
liability company ("Group Investors"), FW Group Genpar, Inc., a Texas
corporation ("FW Group"), Mark A. Wolfson ("Wolfson"), David G. Brown ("Brown"),
Acadia Partners, L.P., a Delaware limited partnership ("Acadia"), Acadia FW
Partners, L.P., a Delaware limited partnership ("Acadia FW"), Acadia MGP, Inc.,
a Texas corporation ("Acadia MGP"), Daniel L. Doctoroff ("Doctoroff"), Steven B.
Gruber ("Gruber"), Glenn R. August ("August"), John R. Monsky ("Monsky"),
Bradford E. Bernstein ("Bernstein"), PTJ, Inc., a Delaware corporation ("PTJ"),
W. R. Cotham ("Cotham"), James N. Alexander ("Alexander"), Thomas R. Delatour,
Jr. ("Delatour"), Anthony P. Scotto ("Scotto"), Margaret Lee Bass 1980 Trust, a
trust existing under the laws of Texas ("MLBT"), Panther City Investment
Company, a Texas corporation ("Panther City"), OHCP GenPar, L.P., a Delaware
limited partnership ("GenPar"), and OHCP MGP, L.L.C., a Delaware limited
liability company ("OHCP MGP").
(b) - (c)
REPORTING PERSONS
HOSPITALITY
Hospitality is a Delaware limited partnership, the principal business of
which is the purchase, sale, exchange, acquisition and holding of investment
securities. The principal business address of Hospitality, which also serves as
its principal office, is 201 Main Street, Suite 3100, Fort Worth, Texas 76102.
ARBOR
Arbor is a Delaware limited partnership, the principal business of which is
the purchase, sale, exchange, acquisition and holding of investment securities.
The principal business address of Arbor, which also serves as its principal
office, is 201 Main Street, Suite 3100, Fort Worth, Texas 76102.
Page 16 of 37
<PAGE>
SCHEDULE 13D
Issuer: MeriStar Hotels & Resorts, Inc. CUSIP Number: 589988104
MHX
MHX is a Delaware limited partnership, the principal business of which is
the purchase, sale, exchange, acquisition and holding of investment securities.
The principal business address of MHX, which also serves as its principal
office, is 201 Main Street, Suite 3100, Fort Worth, Texas 76102.
CHERWELL
Cherwell is a Delaware corporation, the principal business of which is the
purchase, sale, exchange, acquisition and holding of investment securities. The
principal business address of Cherwell, which also serves as its principal
office, is 201 Main Street, Suite 3100, Fort Worth, Texas 76102. Pursuant to
Instruction C to Schedule 13D of the Act, the name, residence or business
address, and present principal occupation or employment of each director,
executive officer and controlling person of Cherwell are as follows:
RESIDENCE OR PRINCIPAL OCCUPATION
NAME BUSINESS ADDRESS OR EMPLOYMENT
Crandall 201 Main St., Ste. 3100 Vice President and Chief Operating
Fort Worth, Texas 76102 Officer of Keystone
Doctoroff 65 E. 55th Street Managing Director of
New York, New York 10022 Oak Hill Partners, Inc.
Gruber 65 E. 55th Street Managing Director of
New York, New York 10022 Oak Hill Partners, Inc.
Monsky 65 E. 55th Street Managing Director of
New York, New York 10022 Oak Hill Partners, Inc.
Bernstein 65 E. 55th Street Employee of
New York, New York 10022 Oak Hill Partners, Inc.
KEYSTONE
Keystone is a Texas corporation, the principal businesses of which are
investment in marketable securities, real estate investment and development,
ownership and operation of oil and gas properties (through Bass Enterprises
Production Co. ["BEPCO"]), the ownership and operation of gas processing plants
and carbon black plants (through various partnerships) and the ownership of
interests in entities engaged in a wide variety of businesses. The principal
business address of Keystone, which also serves as its principal office, is 201
Main Street, Suite 3100, Fort Worth, Texas 76012. Pursuant to Instruction C to
Schedule 13D of the Act, the name, residence or business address, and present
principal occupation or employment of each director, executive officer and
controlling person of Keystone are as follows:
RESIDENCE OR PRINCIPAL OCCUPATION
NAME BUSINESS ADDRESS OR EMPLOYMENT
R. Bass 201 Main St., Ste. 3100 President of Keystone
Fort Worth, Texas 76102
Crandall See above See above
Brown 201 Main St., Ste. 3100 Vice President - Finance
Fort Worth, Texas 76102 of Keystone
Page 17 of 37
<PAGE>
SCHEDULE 13D
Issuer: MeriStar Hotels & Resorts, Inc. CUSIP Number: 589988104
RESIDENCE OR PRINCIPAL OCCUPATION
NAME BUSINESS ADDRESS OR EMPLOYMENT
Doctoroff See above See above
Gruber See above See above
Wolfson 201 Main St., Ste. 3100 Vice President of and
Fort Worth, Texas 76102 Consultant to Keystone
Cotham 201 Main St., Ste. 2600 Vice President/
Fort Worth, Texas 76102 Controller of BEPCO
Reese 201 Main St., Ste. 2600 Treasurer of BEPCO
Fort Worth, Texas 76102
Alexander 201 Main St., Ste. 3100 Vice President of Keystone
Fort Worth, Texas 76102
Carl 201 Main St., Ste. 3100 Vice President of Keystone
Fort Worth, Texas 76102
Monsky See above See above
Delatour 201 Main St., Ste. 3100 Vice President of
Fort Worth, Texas 76102 Keystone
OAK HILL PARTNERS, INC.
Oak Hill Partners, Inc. is a Delaware corporation, the principal business
of which is serving as an investment consultant to Acadia Partners, L.P.
("Acadia"). Acadia is a Delaware limited partnership, formed to invest in public
and private debt and equity securities. The principal business address of Oak
Hill Partners, Inc. is 65 East 55th Street, New York, New York 10022.
BEPCO
BEPCO is a Texas corporation, the principal business of which is oil
exploration and drilling and producing hydrocarbons. The principal business
address of BEPCO, which also serves as its principal office, is 201 Main Street,
Suite 3100, Fort Worth, Texas 76102.
GROUP 31
Group 31 is a Texas corporation, the principal business of which is the
purchase, sale, exchange, acquisition and holding of investment securities. The
principal business address of Group 31, which also serves as its principal
office, is 201 Main Street, Suite 3100, Fort Worth, Texas 76102. Pursuant to
Instruction C to Schedule 13D of the Act, the name, residence or business
address, and present principal occupation or employment of each director,
executive officer and controlling person of Group 31 are as follows:
RESIDENCE OR PRINCIPAL OCCUPATION
NAME BUSINESS ADDRESS OR EMPLOYMENT
Crandall See above See above
Brown See above See above
Page 18 of 37
<PAGE>
SCHEDULE 13D
Issuer: MeriStar Hotels & Resorts, Inc. CUSIP Number: 589988104
RESIDENCE OR PRINCIPAL OCCUPATION
NAME BUSINESS ADDRESS OR EMPLOYMENT
Cotham See above See above
Reese See above See above
Alexander See above See above
Wolfson See above See above
Pinson 201 Main St., Ste. 3100 Employee of BEPCO
Fort Worth, Texas 76102
Delatour See above See Above
MCI
MCI is a Delaware corporation, the principal business of which is investing
in public and private debt and equity securities. The principal business address
of MCI, which also serves as its principal office, is 65 East 55th Street, 32nd
Floor, New York, New York 10022. Pursuant to Instruction C to Schedule 13D of
the Act, the name, residence or business address, and present principal
occupation or employment of each director, executive officer and controlling
person of MCI are as follows:
RESIDENCE OR PRINCIPAL OCCUPATION
NAME BUSINESS ADDRESS OR EMPLOYMENT
Doctoroff See above See above
Gruber See above See above
PENOBSCOT
Penobscot is a Delaware limited partnership, formed to invest in public and
private debt and equity securities. The principal business address of Penobscot,
which also serves as its principal office, is 65 East 55th Street, New York, New
York 10022.
PTJ MERCHANT
PTJ Merchant is a Delaware limited partnership, the principal business of
which is serving as the general partner of Penobscot and activities related
thereto. The principal business address of PTJ Merchant, which also serves as
its principal office, is 65 East 55th Street, New York, New York 10022.
CRANDALL
See above.
Page 19 of 37
<PAGE>
SCHEDULE 13D
Issuer: MeriStar Hotels & Resorts, Inc. CUSIP Number: 589988104
CAPITAL
Capital is a Texas general partnership, the principal business of which is
investing in public and private debt and equity securities. The principal
business address of Capital, which also serves as its principal office, is 201
Main Street, Suite 3100, Fort Worth, Texas 76102.
KEYSTONE
See above.
R. BASS
See above.
OHCP
OHCP is a Delaware limited partnership, the principal business of which is
investing in public and private debt and equity securities. The principal
business address of OHCP is 201 Main Street, Suite 2300, Fort Worth, Texas
76102.
OHCMP
OHCMP is a Delaware limited partnership, the principal business of which is
investing in public and private debt and equity securities. The principal
business address of OHCMP is 201 Main Street, Suite 2300, Fort Worth, Texas
76102.
ITEM 2 PERSONS
Pursuant to Instruction C to Schedule 13D of the Act, information with
respect to the Item 2 Persons is set forth below.
GROUP III
Group III is a Delaware limited liability company, the principal business
of which is the purchase, sale, acquisition and holding of investment
securities. Group III also serves as the sole general partner of FW Hospitality.
The principal business address of Group III, which also serves as its principal
office, is 201 Main Street, Suite 3100, Fort Worth, Texas 76102. Crandall is the
sole member of Group III.
GROUP INVESTORS
Group Investors is a Delaware limited liability company, the principal
business of which is the purchase, sale, acquisition and holding of investment
securities. Group Investors also serves as the sole general partner of Arbor.
The principal business address of Group Investors, which also serves as its
principal office, is 201 Main Street, Suite 3100, Fort Worth, Texas 76102.
Wolfson is the sole member of Group Investors.
FW GROUP
FW Group is a Texas corporation, the principal business of which is the
purchase, sale, acquisition and holding of investment securities. FW Group also
serves as the sole general partner of MHX. The principal business address of FW
Group, which also serves as its principal office, is 201 Main Street, Suite
3100, Fort Worth, Texas 76102. The name, residence or business address, and
present principal occupation or employment of each director, executive officer
and controlling person of FW Group are as follows:
Page 20 of 37
<PAGE>
SCHEDULE 13D
Issuer: MeriStar Hotels & Resorts, Inc. CUSIP Number: 589988104
RESIDENCE OR PRINCIPAL OCCUPATION
NAME BUSINESS ADDRESS OR EMPLOYMENT
Crandall See above See above
Brown See above See above
Cotham See above See above
Reese See above See above
Alexander See above See above
Wolfson See above See above
Delatour See above See above
WOLFSON
See above.
BROWN
See above.
ACADIA
Acadia is a Delaware limited partnership, formed to invest in public and
private debt and equity securities. Acadia is also the sole shareholder of
Cherwell. The principal business address of Acadia, which also serves as its
principal office, is 201 Main Street, Suite 3100, Fort Worth, Texas 76102.
ACADIA FW
Acadia FW is a Delaware limited partnership, the principal business of
which is serving as the sole general partner of Acadia and activities related
thereto. The principal business address of Acadia FW, which also serves as its
principal office, is 201 Main Street, Suite 3100, Fort Worth, Texas 76102.
ACADIA MGP
Acadia MGP is a Texas corporation, the principal business of which is
serving as the managing general partner of Acadia FW and activities related
thereto. The principal business address of Acadia MGP, which also serves as its
principal office, is 201 Main Street, Suite 3100, Fort Worth, Texas 76102. The
name, residence or business address, and present principal occupation or
employment of each director, executive officer and controlling person of Acadia
MGP are as follows:
RESIDENCE OR PRINCIPAL OCCUPATION
NAME BUSINESS ADDRESS OR EMPLOYMENT
Crandall See above See above
Doctoroff See above See above
Gruber See above See above
Page 21 of 37
<PAGE>
SCHEDULE 13D
Issuer: MeriStar Hotels & Resorts, Inc. CUSIP Number: 589988104
RESIDENCE OR PRINCIPAL OCCUPATION
NAME BUSINESS ADDRESS OR EMPLOYMENT
Cotham See above See above
Monsky See above See above
DOCTOROFF
See above.
GRUBER
See above.
AUGUST
See above.
BERNSTEIN
See above.
PTJ
PTJ is a Delaware corporation, the principal business of which is serving
as general partner of PTJ Merchant and activities related thereto. The principal
business address of PTJ, which also serves as its principal office, is 65 East
55th Street, 32nd Floor, New York, New York 10022. The name, residence or
business address, and present principal occupation or employment of each
director, executive officer and controlling person of PTJ are as follows:
RESIDENCE OR PRINCIPAL OCCUPATION
NAME BUSINESS ADDRESS OR EMPLOYMENT
Crandall See above See above
Doctoroff See above See above
Gruber See above See above
Cotham See above See above
Scotto 65 East 55th Street Employee of Oak Hill
New York, New York 10022 Partners, Inc.
Monsky See above See above
COTHAM
See above.
ALEXANDER
See above.
Page 22 of 37
<PAGE>
SCHEDULE 13D
Issuer: MeriStar Hotels & Resorts, Inc. CUSIP Number: 589988104
DELATOUR
See above.
SCOTTO
See above.
MLBT
MLBT is a trust existing under the laws of the State of Texas. The address
of MLBT is 201 Main Street, Suite 3100, Fort Worth, Texas 76102. Pursuant to
Instruction C to Schedule 13D of the Act, information with respect to its
trustee, Panther City, is set forth below.
PANTHER CITY
Panther City is a Texas corporation. Panther City is a private trust
company that serves as trustee of various trusts. The principal business address
of Panther City, which also serves as its principal office, is 201 Main Street,
Suite 2700, Fort Worth, Texas 76102. Pursuant to Instruction C to Schedule 13D
of the Act, the name, residence or business address, and present principal
occupation or employment of each director, executive officer and controlling
person of Panther City are as follows:
RESIDENCE OR PRINCIPAL OCCUPATION
NAME BUSINESS ADDRESS OR EMPLOYMENT
Cotham See above See above
William P. Hallman, Jr. 201 Main St., Ste. 2500 Director of the law firm of
Fort Worth, Texas 76102 Kelly, Hart & Hallman, P.C.
GENPAR
GenPar is a Delaware limited partnership, the principal business of which
is investing in public and private debt and equity securities and acting as
general partner of OHCP and OHCMP. The principal business address of GenPar,
which also serves as its principal office, is 201 Main Street, Suite 3100, Fort
Worth, Texas 76102. OHCP MGP is the general partner of GenPar.
OHCP MGP
OHCP MGP is a Delaware limited liability company, the principal business of
which is investing in public and private debt and equity securities and as
acting general partner of GenPar. The principal business address of OHCP MGP,
which also serves as its principal office, is 201 Main Street, Suite 3100, Fort
Worth, Texas 76102. The name, residence or business address, and present
principal occupation or employment of each director, executive officer and
controlling person of OHCP MGP are as follows:
RESIDENCE OR PRINCIPAL OCCUPATION
NAME BUSINESS ADDRESS OR EMPLOYMENT
Crandall See above See above
Doctoroff See above See above
Gruber See above See above
Page 23 of 37
<PAGE>
SCHEDULE 13D
Issuer: MeriStar Hotels & Resorts, Inc. CUSIP Number: 589988104
RESIDENCE OR PRINCIPAL OCCUPATION
NAME BUSINESS ADDRESS OR EMPLOYMENT
Wolfson See above See above
Cotham See above See above
Delatour See above See above
John H. Fant 201 Main St., Ste. 2300 Lawyer
Fort Worth, Texas 76102
Kevin G. Levy 201 Main St., Ste. 2300 Lawyer
Fort Worth, Texas 76102
Also included herein is information with respect to the number of shares
of the Stock beneficially owned by the following persons (who shall also be
referred to as "Item 2 Persons"), William H. Bohnsack, Jr. ("Bohnsack"), Scott
Krase ("Krase"), Ty Wallach ("Wallach"), Oak Hill Partners, Inc. ("Oak Hill"),
John Stevenson ("Stevenson"), Trust for the Benefit of Walker Delatour ("Walker
Trust"), Trust for the Benefit of William Delatour ("William Trust"), and
William Janes ("Janes").
(d) None of the entities or persons identified in this Item has, during
the last five years, been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors).
(e) None of the entities or persons identified in this Item 2 has, during
the last five years, been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgement, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
stated securities laws or finding any violation with respect to such laws.
(f) All of the natural persons identified in this Item 2 are citizens of
the United States of America.
Item 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The response to Item 3 is amended in its entirety to read as follows:
The source and amount of the funds used by the Reporting Persons to
purchase shares of Stock are as follows:
REPORTING PERSON SOURCE OF FUNDS AMOUNT OF FUNDS
Hospitality Contributions from Partners $1,686,655.33
Arbor Contributions from Partners $1,686,655.50
MHX Contributions from Partners $1,686,653.13
Cherwell Not Applicable (1) Not Applicable
Group 31 Not Applicable (2) Not Applicable
MCI Not Applicable (3) Not Applicable
Penobscot Not Applicable (4) Not Applicable
PTJ Merchant Not Applicable (5) Not Applicable
Crandall Personal Funds (6) $3,081.40
Capital Not Applicable (7) Not Applicable
Page 24 of 37
<PAGE>
SCHEDULE 13D
Issuer: MeriStar Hotels & Resorts, Inc. CUSIP Number: 589988104
Keystone Not Applicable (8) Not Applicable
R. Bass Personal Funds (9) $32,055.08
OHCP Contributions from Partners $ 4,875,000.00
OHCMP Contributions from Partners $ 125,000.00
Item 2 Persons Not Applicable (10) Not Applicable
1. 53,068 shares of the Stock were acquired by Cherwell on August 3, 1998 in
connection with a spin-off of the Issuer by CapStar Hotel Company; thus, no
funds were expended in acquiring these shares.
2. 4,067 shares of the Stock were acquired by Group 31 on August 3, 1998 in
connection with a spin-off of the Issuer by CapStar Hotel Company; thus, no
funds were expended in acquiring these shares.
3. 39 shares of the Stock were acquired by MCI on August 3, 1998 in connection
with a spin-off of the Issuer by CapStar Hotel Company; thus, no funds were
expended in acquiring these shares.
4. 75,260 shares of the Stock were acquired by Penobscot on August 3, 1998 in
connection with a spin-off of the Issuer by CapStar Hotel Company; thus, no
funds were expended in acquiring these shares.
5. 100,000 shares of the Stock were acquired by the PTJ Merchant on August 3,
1998 in connection with a spin-off of the Issuer by CapStar Hotel Company;
thus, no funds were expended in acquiring these shares.
6. 6,507 shares of the Stock were acquired by Crandall on August 3, 1998 in
connection with a spin-off of the Issuer by CapStar Hotel Company; thus, no
funds were expended in acquiring these shares.
7. 45,754 shares of the Stock were acquired by Capital on August 3, 1998 in
connection with a spin-off of the Issuer by CapStar Hotel Company; thus, no
funds were expended in acquiring these shares.
8. 19,367 shares of the Stock were acquired by Keystone on August 3, 1998 in
connection with a spin-off of the Issuer by CapStar Hotel Company; thus, no
funds were expended in acquiring these shares.
9. 67,720 shares of the Stock were acquired by R. Bass on August 3, 1998 in
connection with a spin-off of the Issuer by CapStar Hotel Company; thus, no
funds were expended in acquiring these shares.
10. All Item 2 Persons, except GenPar and OHCP MGP, acquired shares of the
Stock on August 3, 1998 in connection with the spin-off of the Issuer by
CapStar Hotel Company; thus, no funds were expended in acquiring these
shares.
Item 4. PURPOSE OF TRANSACTION.
The response to Item 4 is amended in its entirety to read as follows:
The Reporting Persons acquired and continue to hold the Stock reported
herein for investment purposes. Depending on market conditions and other factors
that the Reporting Persons may deem material to their respective investment
decisions, the Reporting Persons may purchase additional Stock in the open
market or in private transactions. Depending on these same factors and in the
case of OHCP and OHCMP, except as otherwise restricted by the Purchase Agreement
referred to in Item 6 herein, the Reporting Persons may sell all or a portion of
the Stock on the open market or in private transactions.
Except as set forth in this Item 4, the Item 2 Persons have no present
plans or proposals that relate to or that would result in any of the actions
specified in clauses (a) through (j) or Item 4 of Schedule 13D or the Act.
Page 25 of 37
<PAGE>
SCHEDULE 13D
Issuer: MeriStar Hotels & Resorts, Inc. CUSIP Number: 589988104
Item 5. INTEREST IN SECURITIES OF THE ISSUER.
The response to Item 5 is amended in its entirety to read as follows:
(a)
REPORTING PERSONS
HOSPITALITY
Hospitality beneficially owns 764,067 shares of the Stock, which
constitutes approximately 2.8% of the outstanding shares of Stock.
ARBOR
Arbor beneficially owns 764,067 shares of the Stock, which constitutes
approximately 2.8% of the outstanding shares of Stock.
MHX
MHX beneficially owns 764,066 shares of the Stock, which constitutes
approximately 2.8% of the outstanding shares of Stock.
CHERWELL
Cherwell beneficially owns 61,912 shares of the Stock, which constitutes
approximately 0.2% of the outstanding shares of stock.
GROUP 31
Group 31 beneficially owns 4,067 shares of the Stock, which constitutes
less than 0.1% of the outstanding shares of Stock.
MCI
MCI beneficially owns 45 shares of the Stock, which constitutes less than
0.1% of the outstanding shares of Stock.
PENOBSCOT
Because of its position as the sole stockholder of MCI, and because of its
direct ownership of 87,803 shares of Stock, Penobscot may, pursuant to Rule
13d-3 of the Act, be deemed to be the beneficial owner of 87,848 shares of the
Stock, which constitutes approximately 0.3% of the outstanding shares of Stock.
PTJ MERCHANT
Because of its position as the sole stockholder of Penobscot, and because
of its direct ownership of 116,666 shares of Stock, PTJ Merchant may, pursuant
to Rule 13d-3 of the Act, be deemed to be the beneficial owner of 24,514 shares
of the Stock, which constitutes approximately 0.8% of the outstanding shares of
Stock.
CRANDALL
Because of his position as the president of each of Acadia MGP, Group 31
and PTJ, because of his position as the sole member of Group III, and because of
his direct ownership of 7,592 shares of the Stock, Crandall may,
Page 26 of 37
<PAGE>
SCHEDULE 13D
Issuer: MeriStar Hotels & Resorts, Inc. CUSIP Number: 589988104
pursuant to Rule 13d-3 of the Act, be deemed to be the beneficial owner of
1,030,493 shares of Stock, which constitutes approximately 3.8% of the
outstanding shares of Stock.
CAPITAL
Capital beneficially owns 45,754 shares of the Stock, which constitutes
approximately 0.2% of the outstanding shares of the Stock.
KEYSTONE
The number of shares of the Stock that Keystone owns beneficially is
193,367, which constitutes approximately 0.7% of the outstanding shares of the
Stock.
R. BASS
Because of his position as sole director of Keystone, and because of his
direct ownership of 77,518 shares of the Stock, R. Bass may, pursuant to Rule
13d-3 of the Act, be deemed to be the beneficial owner of 270,885 shares of
Stock, which constitutes approximately 1.0% of the outstanding shares of Stock.
OHCP
OHCP beneficially owns 1,772,728 shares of the Stock, which constitutes
approximately 6.5% of the outstanding shares of the Stock.
OHCMP
OHCMP beneficially owns 45,454 shares of the Stock, which constitutes
approximately 0.2% of the outstanding shares of the Stock.
ITEM 2 PERSONS
Information with respect to the Item 2 persons is attached hereto as
Schedule I.
(b)
REPORTING PERSONS
HOSPITALITY
Acting through its general partner, Hospitality has the sole power to vote
or to direct the vote and to dispose or to direct the disposition of 764,067
shares of Stock.
ARBOR
Acting through its general partner, Arbor has the sole power to vote or to
direct the vote and to dispose or to direct the disposition of 764,067 shares of
Stock.
MHX
Acting through its general partner, MHX has the sole power to vote or to
direct the vote and to dispose or to direct the disposition of 764,066 shares of
Stock.
CHERWELL
Page 27 of 37
<PAGE>
SCHEDULE 13D
Issuer: MeriStar Hotels & Resorts, Inc. CUSIP Number: 589988104
Acting through its president, Cherwell has the sole power to vote or to
direct the vote and to dispose or to direct the disposition of 61,912 shares of
the Stock.
GROUP 31
Acting through Crandall, its President, Group 31 has the sole power to vote
or to direct the vote and to dispose or to direct the disposition of 4,067
shares of the Stock.
MCI
Acting through its sole stockholder, MCI has the sole power to vote or to
direct the vote and to dispose or to direct the disposition of 45 shares of
Stock.
PENOBSCOT
Acting through its sole general partner, and in its capacity as the sole
stockholder of MCI with respect to 45 shares of the Stock, Penobscot has the
sole power to vote or to direct the vote and to dispose or to direct the
disposition of 87,848 shares of Stock.
PTJ MERCHANT
In its capacity as the sole general partner of Penobscot, and acting
through its managing general partner, PTJ Merchant has the sole power to vote or
to direct the vote and to dispose or to direct the disposition of 204,514 shares
of Stock.
CRANDALL
In his capacity as the sole member of Group III, Crandall has the sole
power to vote or to direct the vote and to dispose or to direct the disposition
of 764,067 shares of Stock. In his capacity as the president and sole
shareholder of Acadia MGP, Crandall has the sole power to vote or to direct the
vote and to dispose or to direct the disposition of 61,912 shares of Stock. In
his capacity as the president and sole shareholder of Group 31, Crandall has the
sole power to vote or to direct the vote and to dispose or to direct the
disposition of 4,067 shares of Stock. In his capacity as the president and sole
stockholder of PTJ, Crandall has the sole power to vote or to direct the vote
and to dispose or to direct the disposition of 204,514 shares of Stock. In his
individual capacity, Crandall has the sole power to vote or to direct the vote
and to dispose or to direct the disposition of 7,592 shares of Stock.
CAPITAL
Acting through its managing partner, MLBT, Capital has the sole power to
vote or to direct the vote and to dispose or direct the disposition of 45,754
shares of the Stock.
KEYSTONE
Acting through R. Bass, its president and sole director, Keystone has the
sole power to vote or to direct the vote and to dispose or to direct the
disposition of 193,367 shares of the Stock.
R. BASS
In his capacity as the sole director and president of Keystone, R. Bass has
sole power to vote or to direct the vote and to dispose or to direct the
disposition of 193,367 shares of Stock. In his individual capacity, R. Bass has
sole power to vote or to direct the vote and to dispose or to direct the
disposition of 77,518 shares of Stock.
OHCP
Page 28 of 37
<PAGE>
SCHEDULE 13D
Issuer: MeriStar Hotels & Resorts, Inc. CUSIP Number: 589988104
Acting through GenPar, OHCP has the sole power to vote or to direct the
vote and to dispose or direct the disposition of 1,772,728 shares of the Stock.
OHCMP
Acting through GenPar, OHCMP has the sole power to vote or to direct the
vote and to dispose or direct the disposition of 45,454 shares of the Stock.
ITEM 2 PERSONS
Information with respect to the Item 2 Persons is attached hereto as
Schedule I.
(c) Response to item 5(c) is hereby partly amended by adding at the end
thereof the following:
On April 15, 1999, OHCP and OHCMP purchased an aggregate of 1,818,182
shares of the Issuer's Stock for an aggregate purchase price of $5,000,000 as
more fully described in Item 6.
Except as set forth in this paragraph (c), to the best of the knowledge of
each of the Reporting Persons, none of the persons named in response to
paragraph (a) has effected any transactions in the Stock during the past 60
days.
(d) Each of the Reporting Persons affirms that no person other than such
Reporting Person has the right to receive or the power to direct the receipt of
dividends from, or the proceeds from the sale of, the Stock owned by such
Reporting Person.
(e) Not applicable.
Item 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
The response to Item 6 is amended in its entirety to read as follows:
On April 15, 1999 pursuant to a Stock Purchase Agreement dated as of March
31, 1999, as amended as of April 14, 1999, by and between the Issuer, OHCP and
OHCMP (the "Purchase Agreement", a copy of which is attached hereto as Exhibit
99.5 and incorporated herein by reference), OHCP and OHCMP purchased an
aggregate of 1,818,182 shares of the Issuer's Stock for an aggregate purchase
price of $5,000,000. In addition, pursuant to the Purchase Agreement, OHCP and
OHCMP have the option (the "Option") to purchase additional shares of the
Issuer's Stock (the "Option 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 Stock on the New York Stock Exchange for the twenty
(20) Trading Days (as defined in the Purchase Agreement) ending on the Trading
Day prior to the purchase and issuance of Option Shares or (ii) $2.75. OHCP and
OHCMP may exercise the Option if MIP GP, L.L.C. ("MIP"), a wholly-owned
subsidiary of MeriStar H&R Operating Company, L.P. (the general partner of which
is the Issuer), a Delaware limited partnership, wishes to cause the Underlying
Partnership (as defined in the JV Agreement referred to below) to enter into a
contract to acquire a Hotel Interest (as defined in the JV Agreement referred to
below) and the entering into of such contract would cause the Committed Amount
(as defined in the Purchase Agreement) to exceed $200,000,000.
The Purchase Agreement also provides that OHCP and OHCMP may not transfer
any of their shares of the Issuer's Stock without the prior written consent of
the Issuer during the period beginning on April 15, 1999 and ending on the
earlier to occur of either (i) six months from April 15, 1999 or (ii) the sale
or other disposition of all Hotel Interests (as defined in the Agreement of
Limited Partnership of MIP Lessee, L.P. dated March 31, 1999 (the "JV
Agreement"), which is attached hereto as Exhibit 99.6 and incorporated herein by
reference) by the Underlying Partnership (as defined in the JV Agreement) and
its subsidiaries.
Page 29 of 37
<PAGE>
SCHEDULE 13D
Issuer: MeriStar Hotels & Resorts, Inc. CUSIP Number: 589988104
Pursuant to the Purchase Agreement, OHCP has the right to appoint a
representative to attend meetings of the Board of Directors of the Issuer, to
change the representative so appointed at any time and, upon the resignation of
such representative for any reason, to reappoint such a representative as long
as OHCP and OHCMP collectively own at least fifty percent (50%) of the Options
and the Stock that they currently own. The right of OHCP to appoint a
representative to attend meetings of the Board of Directors of the Issuer shall
be suspended during any period of time during which their representative serves
as a member of the Board of Directors of the Issuer. On April 15, 1999, OHCP
designated Daniel L. Doctoroff as its representative and the Issuer accepted
such designation.
OHCP, OHCMP and the Issuers have entered into a Registration Rights
Agreement dated as of March 31, 1999, (the "Registration Rights Agreement", a
copy of which is attached hereto as Exhibit 99.7 and incorporated herein by
reference) pursuant to which OHCP and OHCMP have the right to demand
registration of their Registrable Securities (as defined in the Registration
Rights Agreement) upon the terms and conditions set forth therein.
Except as set forth herein or in the Exhibits filed or to be filed
herewith, none of the Reporting Persons have any contracts, arrangements,
understandings or relationships (legal or otherwise) with respect to each other
or with any person with respect to any of the Issuer's Stock owned by such
Reporting Person.
Item 7. MATERIAL TO BE FILED AS EXHIBITS.
*Exhibit 99.1 -- Agreement pursuant to Rule 13d-1 (k) (1) (iii).
*Exhibit 99.2 -- Limited Partnership Agreement of FW Hospitality, L.P.
*Exhibit 99.3 -- Limited Partnership Agreement of Arbor REIT, L.P.
*Exhibit 99.4 -- Limited Partnership Agreement of MHX Investors, L.P.
Exhibit 99.5 -- Stock Purchase Agreement by and between the Issuer,
OHCP and OHCMP dated March 31, 1999, as amended as of
April 14, 1999.
Exhibit 99.6 -- Limited Partnership Agreement of MIP Lessee, L.P. dated
March 31, 1999.
Exhibit 99.7 -- Registration Rights Agreement dated March 31,1999.
*Filed Previously.
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
DATED: April 27, 1999
FW HOSPITALITY, L.P.
By: GROUP III 31, L.L.C.,
general partner
Page 30 of 37
<PAGE>
SCHEDULE 13D
Issuer: MeriStar Hotels & Resorts, Inc. CUSIP Number: 589988104
By: /s/ J. Taylor Crandall
---------------------------------
J. Taylor Crandall, sole member
ARBOR REIT, L.P.
By: GROUP INVESTORS, L.L.C.,
general partner
By: /s/ Mark A. Wolfson
---------------------------------
Mark A. Wolfson, sole member
MHX INVESTORS, L.P.
By: FW GROUP GENPAR, INC.,
general partner
By: /s/ W. R. Cotham
---------------------------------
W. R. Cotham, Vice President
/s/ W. R. Cotham
------------------------------------------
W. R. COTHAM
As Vice President of each of CHERWELL INVESTORS,
INC., GROUP 31, INC. and MC INVESTMENT CORPORATION
PENOBSCOT PARTNERS, L.P.
By: PTJ MERCHANT BANKING PARTNERS, L.P.,
general partner
By: PTJ, INC.,
managing general partner
By: /s/ W.R. Cotham
----------------------------------
W.R. Cotham, Vice President
PTJ MERCHANT BANKING PARTNERS, L.P.
By: PTJ, INC.,
managing general partner
By: /s/ W.R. Cotham
----------------------------
W. R. Cotham, Vice President
/s/ J. Taylor Crandall
------------------------------------------
J. TAYLOR CRANDALL
CAPITAL PARTNERSHIP
Page 31 of 37
<PAGE>
SCHEDULE 13D
Issuer: MeriStar Hotels & Resorts, Inc. CUSIP Number: 589988104
By: MARGARET LEE BASS 1980 TRUST,
Managing Partner
By: PANTHER CITY INVESTMENT COMPANY, Trustee
By: /s/ W. R. Cotham
-----------------------------------
KEYSTONE, INC.
By: /s/ W. R. Cotham
---------------------------------
W.R. Cotham, Vice President
/s/ W.R. Cotham
------------------------------------------
W.R. COTHAM,
As attorney-in-fact for:
ROBERT M. BASS (1)
OAK HILL CAPITAL PARTNERS, L.P.
By: OHCP GENPAR, L.P.,
general partner
By: OHCP MGP, L.L.C.,
general partner
By: /s/ Kevin G. Levy
----------------------------
OAK HILL CAPITAL MANAGEMENT PARTNERS, L.P.
By: OHCP GENPAR, L.P.,
general partner
By: OHCP MGP, L.L.C.,
general partner
By: /s/ Kevin G. Levy
----------------------------
(1) A Power of Attorney authorizing W.R. Cotham, et al., to act on behalf
of Robert M. Bass previously has been filed with the Securities and
Exchange Commission.
Page 32 of 37
<PAGE>
SCHEDULE 13D
Issuer: MeriStar Hotels & Resorts, Inc. CUSIP Number: 589988104
SCHEDULE I
Item 5 (a)
The following persons beneficially own the number of shares of Stock set
forth opposite their names:
Name Number of Shares
FW Group 590
Wolfson 7,117
Brown 7,615
Doctoroff 67,882
Gruber 67,033
August 78,204
Monsky 12,731
Bernstein 33,770
Alexander 2,034
Delatour 5,540
Scotto 2,034
Bohnsack 8,305
Krase 6,846
Wallach 491
Oak Hill 14,154
Stevenson 1,993
Walker Trust 3,754
William Trust 3,754
William Janes 9,151
Item 5 (b)
The persons listed above have the sole power to vote or to direct the vote
and to dispose or to direct the disposition of the number of shares of Stock set
forth opposite their names.
Page 33 of 37
<PAGE>
SCHEDULE 13D
Issuer: MeriStar Hotels & Resorts, Inc. CUSIP Number: 589988104
EXHIBIT INDEX
EXHIBIT DESCRIPTION
99.1 Agreement pursuant to Rule 13-d-1 (k) (1) (iii), filed herewith
*99.2 Limited Partnership Agreement of FW Hospitality, L.P.
*99.3 Limited Partnership Agreement of Arbor REIT, L.P.
*99.4 Limited Partnership Agreement of MHX Investors, L.P.
99.5 Stock Purchase Agreement by and between the Issuer, OHCP and OHCMP
dated March 31, 1999, as amended as of April 14, 1999.
99.6 Limited Partnership Agreement of MIP Lessee, L.P. dated March 31, 1999.
99.7 Registration Rights Agreement dated March 31, 1999.
*Filed previously.
Page 34 of 37
<PAGE>
SCHEDULE 13D
Issuer: MeriStar Hotels & Resorts, Inc. CUSIP Number: 589988104
Exhibit 99.1
Pursuant to Rule 13d-1 (k) (1) (iii) of Regulation 13-D-G of the General
Rules and Regulations of the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended, the undersigned agrees that the
statement to which this Exhibit is attached is filed on behalf of each of them
in the capacities set forth below.
FW HOSPITALITY, L.P.
By: GROUP III 31, L.L.C., general partner
By: /s/ J. Taylor Crandall
-----------------------------------------
J. Taylor Crandall, sole member
ARBOR REIT, L.P.
By: GROUP INVESTORS, L.L.C., general partner
By: /s/ Mark A. Wolfson
-----------------------------------------
Mark A. Wolfson, sole member
MHX INVESTORS, L.P.
By: FW GROUP GENPAR, INC., general partner
By: /s/ W.R. Cotham
-----------------------------------------
W.R. Cotham, Vice President
/s/ W.R. Cotham
---------------------------------------------
W.R. Cotham
As Vice President of each of CHERWELL
INVESTORS, INC., GROUP 31, INC. and MC
INVESTMENT CORPORATION
Page 35 of 37
<PAGE>
SCHEDULE 13D
Issuer: MeriStar Hotels & Resorts, Inc. CUSIP Number: 589988104
PENOBSCOT PARTNERS, L.P.
By: PTJ MERCHANT BANKING PARTNERS, L.P.,
general partner
By: PTJ, Inc., managing general partner
By: /s/ W.R. Cotham
----------------------------------------
W.R. Cotham, Vice President
PTJ MERCHANT BANKING PARTNERS, L.P.
By: PTJ, INC., managing general partner
By: /s/ W.R. Cotham
----------------------------------------
W.R. Cotham, Vice President
/s/ J. Taylor Crandall
--------------------------------------------
J. TAYLOR CRANDALL
CAPITAL PARTNERSHIP
By: MARGARET LEE BASS 1980 TRUST,
Managing Partner
By: PANTHER CITY INVESTMENT COMPANY, Trustee
By: /s/ W.R. Cotham
----------------------------------------
Page 36 of 37
<PAGE>
SCHEDULE 13D
Issuer: MeriStar Hotels & Resorts, Inc. CUSIP Number: 589988104
KEYSTONE, INC.
By: /s/ W.R. Cotham
----------------------------------------
W.R. Cotham, Vice President
/s/ W.R. Cotham
--------------------------------------------
W.R. COTHAM
As Attorney-in-Fact for:
ROBERT M. BASS(1)
OAK HILL CAPITAL PARTNERS, L.P.
By: OHCP GENPAR, L.P., general partner
By: OHCP MGP, L.L.C., general partner
By: /s/ Kevin G. Levy
----------------------------------------
OAK HILL CAPITAL MANAGEMENT PARTNERS, L.P.
By: OHCP GenPar, L.P., general partner
By: OHCP MGP, L.L.C., general partner
By: /s/ Kevin G. Levy
----------------------------------------
- --------
(1) A Power of Attorney authorizing W.R. Cotham, et al., to act on behalf of
Robert M. Bass previously has been filed with the Securities and Exchange
Commission.
Page 37 of 37
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of
March 31, 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.
WITNESSETH:
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:
<PAGE>
ARTICLE I
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
<PAGE>
3
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to 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 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.
<PAGE>
4
"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.
(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.
<PAGE>
5
(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 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
<PAGE>
6
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. 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.
<PAGE>
7
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.
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
<PAGE>
8
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.
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.
<PAGE>
9
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 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
<PAGE>
10
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
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, 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.
<PAGE>
11
(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 Severabilty. 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 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>
12
IN WITNESS WHEREOF, the undersigned have executed and
delivered this Agreement as of the date first stated above.
MERISTAR HOTELS & RESORTS, INC.
By: /s/ John Emery
----------------------------------------
Name:
Title:
OAK HILL CAPITAL PARTNERS, L.P.
By: OHCP GenPar, L.P., its general partner
By: OHCP MGP, LLC, its general partner
By: /s/ John Monsky
----------------------------------------
Name: John Monsky
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
By: /s/ John Monsky
----------------------------------------
Name: John Monsky
Title: Vice President
<PAGE>
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 14th 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
By: -----------------------------------
Name: Daniel L. Doctoroff
Title: Vice President
<PAGE>
EXHIBIT B
---------
HOTEL MANAGEMENT AGREEMENT
HOTEL MANAGEMENT AGREEMENT (this "Agreement") made as of the 31st day
of March 1999, between MIP Lessee, L.P. ("Owner"), a Delaware limited
partnership, and MeriStar Management Company, L.L.C. ("Operator"), a Delaware
limited liability company.
RECITALS
A. Owner leases a full-service hotel (the "Hotel") known as the
Radisson Hotel San Diego, located at 1433 Camino Del Rio South, pursuant to a
certain Lease Agreement (the "Lease"), of even date herewith between MIPs San
Diego, LLC (the "Fee Owner"), as lessor, and Owner, as lessee;
B. Owner and Operator desire to evidence their agreement with respect
to the operation, direction, management, and supervision of the Hotel as more
particularly set forth below; and
C. Owner and Operator agree and understand that, notwithstanding the
duties and responsibilities of Operator hereunder, it is Owner's intention that
Owner have the right to substantially participate directly in the management or
development activities of the Hotel, including the autonomy to supervise the
activities of the Operator, in order that, among other reasons, it qualify as a
"real estate operating company" within the meaning of U.S. Department of Labor
regulation section 2510.3-101(e)(1) and that this Agreement is intended to
effectuate such right.
NOW, THEREFORE, for and in consideration of the premises, and other
good and valuable consideration, Owner and Operator agree as follows:
ARTICLE I
THE HOTEL
1.1 Owner and Operator acknowledge that the Hotel consists of and
contains:
A. A Building (the "Building") with guest rooms, restaurants, lounges,
and conference and meeting rooms together with the parcel of land on which the
Building is located and any outdoor parking areas or other facilities located on
such land;
B. Mechanical systems and built-in installations (the "Installations")
of the Building including, but not limited to, heating, ventilation, air
conditioning, electrical and plumbing systems, elevators and escalators, and
built-in laundry, refrigeration and kitchen equipment;
C. Furniture, furnishings, wall coverings, floor coverings, window
treatments, fixtures and hotel equipment and vehicles (the "FF&E");
D. Chinaware, glassware, silverware, linens, and other items of a
similar nature (the "Operating Equipment"); and
<PAGE>
E. Stock and inventories of paper supplies, cleaning materials and
similar consumable items and food and beverage (the "Operating Supplies").
ARTICLE II
OPERATING TERM
2.1. This Agreement shall have a term (the "Operating Term") commencing
on the date of this Agreement (the "Commencement Date") and expiring on the
fifth anniversary of the Commencment Date, unless sooner terminated in
accordance with the provisions of this Agreement or unless extended by the
written agreement of Owner and Operator.
ARTICLE III
GENERAL SERVICES BY OPERATOR
3.1. During the Operating Term, Operator, as agent and for the account
of Owner, shall in accordance with the Budgets (as defined in Section 9.4) and
the other applicable provisions of this Agreement and subject to the
availability of funds:
A. Recruit, train, direct, supervise, employ and dismiss on-site staff
("Hotel Employees") for the operation of the Hotel and, with Owner's approval,
enter into collective bargaining agreements with unions representing such Hotel
Employees;
B. Develop and implement advertising, marketing, promotion, publicity
and other similar programs for the Hotel;
C. (i) Negotiate, enter into and, at Owner's direction, enforce leases,
licenses and concession agreements (collectively, "Leases") for stores, office
space and lobby space at the Hotel, collect the rent under such Leases and
otherwise administer the Leases and (ii) negotiate, enter into and, at Owner's
direction, enforce contracts for the provision of services to the Hotel.
D. Apply for, process and take all necessary steps to procure and keep
in effect in Owner's name (or ,if required by the licensing authority, in
Operator's name or both) all licenses and permits required for the operation of
the Hotel;
E. Purchase all FF&E, Operating Equipment and Operating Supplies
necessary for the operation of the Hotel;
F. Provide routine accounting and purchasing services as required in
the ordinary course of business;
G. Maintain the Hotel in a good state of repair and in accordance with
all applicable laws, ordinances, regulations, rulings and orders of governmental
authorities and the rules, regulations and orders of the local Board of Fire
Underwriters or similar body and in accordance with all agreements
(collectively,
2
<PAGE>
"Major Agreements") as to which the Hotel or Owner is bound (including, but not
limited to, the Lease, mortgages, deeds of trust, ground leases, restrictive
covenants, franchise agreements and insurance policies);
H. Represent Owner in connection with the making of any capital
improvements to the Hotel or the renovation and refurbishment of the Hotel and
to that end negotiate and enter into agreements for architectural, engineering,
testing, consulting and construction services. Operator shall also establish and
implement appropriate administrative and financial controls for any renovation
or refurbishment of the Hotel, which shall include, but not be limited to,
coordination and administration of the architect, general contractor and other
professionals and consultants employed in connection with any renovation or
refurbishment;
I. At Owner's direction and with Owner's approval, institute, defend
and settle any legal or administrative proceedings relating to the Hotel;
J. Cooperate with Owner and any prospective purchasers or lenders in
all reasonable respects in connection with any actual or proposed sale or
refinancing of the Hotel; and
K. Provide such other services as are required under the terms of this
Agreement or as are customarily performed by management companies of
first-class, full-service hotels or as are necessary for the day-to-day
operation, management and supervision of the Hotel.
ARTICLE IV
GENERAL OPERATION OF THE HOTEL
4.1. Owner hereby engages Operator as the exclusive operator of the
Hotel during the Operating Term and Operator hereby accepts such engagement.
Subject to the terms of this Agreement and the applicable Budgets, Operator
shall have control and discretion in the operation, direction, management and
supervision of the Hotel. Such control and discretion of Operator shall include,
without limitation, the determination of credit policies (including entering
into agreements with credit card organizations), terms of admittance, charges
for rooms, food and beverage policies, entertainment and amusement policies,
leasing, licensing and granting of concessions for commercial space at the
Hotel, and all phases of advertising, promotion and publicity relating to the
Hotel.
4.2 Notwithstanding the provisions of Section 4.1 or any other
provision of this Agreement, Operator shall take no action with regard to the
operation, direction, management or supervision of the Hotel without the prior
approval of Owner if such action requires the approval of the Management
Committee under the Agreement of Limited Partnership (the "LP Agreement") of
Owner, dated as of March __, 1999. Operator acknowledges that it has been
provided a copy of the LP Agreement and has read and understood the provisions
thereof.
4.3. Operator shall operate the Hotel and all of its facilities and
activities in the same manner as is customary and usual in the operation of
first-class, full service hotels in the area of the Hotel to the extent
consistent with the Hotel's facilities. Operator shall perform all of its
services in a diligent and professional manner in accordance with recognized
standards of the hotel management industry for first-class, full-service hotels.
3
<PAGE>
4.4 Operator shall conduct the operations of the Hotel in a manner
consistent with the terms of any applicable Major Agreements.
4.5 Operator will be available to consult with and advise Owner, at
Owner's reasonable request, concerning all policies and procedures affecting all
phases of the conduct of business at the Hotels. Operator shall in all events
consult with Owner before implementing any material changes in policies and
procedures relating to the Hotel.
ARTICLE V
AGENCY; HOTEL EMPLOYEES
5.1. In the performance of its duties as Operator of the Hotel,
Operator shall act solely as agent of Owner. Nothing in this Agreement shall
constitute or be construed to be or create a partnership or joint venture
between Owner and Operator. Except as otherwise provided in this Agreement, (a)
all debts and liabilities to third persons incurred by Operator in the course of
its operation and management of the Hotel in accordance with the provisions of
this Agreement shall be the debts and liabilities of Owner only and (b) Operator
shall not be liable for any such obligations by reason of its management,
supervision, direction and operation of the Hotel as agent for Owner. Operator
may so inform third parties with whom it deals on behalf of Owner and may take
any other reasonable steps to carry out the intent of this paragraph.
5.2. Notwithstanding the provisions of Section 5.1, all Hotel Employees
shall be employees of Operator. All compensation of the Hotel Employees shall be
an Operating Expense (as defined in Section 11.2).
5.3. Operator, with Owner's prior approval, may enroll the Hotel
Employees in pension, medical and health, life insurance and similar employee
benefit plans substantially similar to corresponding plans implemented in
first-class, full-service hotels in the area of the Hotel. Such plans may, with
Owner's prior approval, be joint plans for the benefit of employees at more than
one hotel or motel owned, leased or managed by Operator or its affiliates.
Employer contributions to such plans and reasonable administrative fees which
Operator may expend in connection therewith shall be an Operating Expense. The
administrative expenses of any joint plans will be equitably apportioned by
Operator among properties covered by such plan.
5.4. Operator, in its discretion, may (i) provide lodging for
Operator's executive employees visiting the Hotel in connection with the
performance of Operator's services and allow them the use of Hotel facilities
and (ii) provide the General Manager of the Hotel and other Hotel Employees
temporary living quarters within the Hotel and the use of all Hotel facilities,
in either case at a discounted price or without charge as the case may be;
provided, however, that any such use or discount shall not exceed that which is
customary and usual in the operation of other first-class, full-service hotels,
unless otherwise required by applicable union contract or previously approved by
Owner. Each Monthly Report (as defined in Article IX) shall indicate the extent,
if any, to which Operator has provided such lodging or other services under this
Section for the applicable month.
5.5. Operator shall not be liable for any failure of the Hotel to
comply prior to the Commencement Date with all federal, state, local and foreign
statutes, laws, ordinances, regulations, rules, permits, judgments, orders and
decrees affecting labor union activities, civil rights or employment in the
United States, including, without limitation, the Civil Rights Act of 1870, 42
U.S.C. Sections 1981, the Civil Rights Acts of 1871, 42 U.S.C. Sections 1983 the
Fair Labor Standards Act, 29 U.S.C. Sections 201, et seq., the Civil Rights Act
of 1964, 42 U.S.C. Sections
4
<PAGE>
2000e, et seq., as amended, the Age Discrimination in Employment Act of 1967, 29
U.S.C. Sections 621, et seq., the Rehabilitation Act, 29 U.S.C. Sections 701, et
seq., the Americans With Disabilities Act of 1990, 29 U.S.C. Sections 706, 42
U.S.C. Sections 12101, et seq., the Employee Retirement Income Security Act of
1974, 29 U.S.C. Sections 301, et seq., the Equal Pay Act, 29 U.S.C. Sections
201, et seq., the National Labor Relations Act, 29 U.S.C. Sections 151, et seq.,
and any regulations promulgated pursuant to such statutes (collectively, as
amended from time to time, and together with any similar laws now or hereafter
enacted, the "Employment Laws").
5.6. Operator shall develop and implement policies, procedures and
programs for the Hotel (collectively, the "Employment Policies") designed to
effect compliance with the Employment Laws. The Employment Policies shall be
consistent with industry standards from time to time for reputable companies
managing first-class, full-service hotels. Operator shall regularly review, and
modify as necessary, the Employment Policies in consultation with reputable
counsel experienced in employment law.
5.7. Operator shall periodically make recommendations to Owner with
respect to the desirability of maintaining Employment Practices Liability
Insurance ("Employment Insurance") for the benefit of Owner and Operator. If
Owner shall approve the purchase of Employment Insurance, the premium for such
insurance (or an allocable amount in the event that more than one hotel is
covered by such policy) shall be an Operating Expense.
ARTICLE VI
PROVISION OF FUNDS
6.1. In performing its services under this Agreement, Operator shall
act solely as agent and for the account of Owner. Operator shall not be deemed
to be in default of its obligations under this Agreement to the extent it is
unable to perform any obligation due to the lack of available funds (except to
the extent funds are required of Operator to fulfill its indemnification
obligations under this Agreement).
6.2. Operator shall in no event be required to advance any of its funds
for the operation of the Hotel (except to the extent funds are required of
Operator to fulfill its indemnification obligations under this Agreement).
ARTICLE VII
CENTRALIZED SERVICES
7.1. Operator may, with Owner's prior approval in each instance,
provide or cause its affiliated companies to provide for the Hotel and its
guests the full benefit of any reservations system hereafter established by
Operator or its affiliates and provide, or cause its affiliated companies to
provide, such aspects of any accounting or purchasing services or other group
benefits and services as are made available generally to properties managed by
Operator, all of which are collectively referred to as "Centralized Services."
7.2. Subject to the provisions of the applicable Budget and Owner's
prior approval, Operator or such of Operator's affiliated companies as provide
Centralized Services shall be entitled to be reimbursed for the Hotel's share of
the total costs that are reasonably incurred in providing such Centralized
Services on a system-wide basis to hotels and motels managed by Operator or its
affiliates which costs may include, without
5
<PAGE>
limitation, salaries (including payroll taxes and employee benefits) of
employees and officers of Operator and its affiliates, costs of all equipment
employed in the provision of such services and a reasonable charge for overhead.
The Hotel's share of such costs shall be determined in an equitable manner by
Operator (which shall be reasonably satisfactory to Owner) and substantiated to
Owner after each fiscal year end and shall be an Operating Expense of the Hotel.
In no event shall Owner be required to reimburse Operator for accounting and
purchasing services required in the ordinary course of business of operating the
Hotel. Notwithstanding the foregoing, Operator's fee for centralized accounting
services shall be the amount set forth in Article X.
ARTICLE VIII
WORKING CAPITAL AND BANK ACCOUNTS
8.1. Owner will provide Operator with initial working capital for the
Hotel in the amount of $750 per room. Thereafter, funds sufficient in amount to
constitute normal working capital for the uninterrupted and efficient operation
of the Hotel shall be maintained from Total Revenues (as defined in Section
11.1) in an amount at least equal to the working capital specified in the most
recent Cash Flow Forecast (as defined in Section 9.4).
8.2. All funds received by Operator in the operation of the Hotel,
including working capital furnished by Owner, shall be deposited in a special
account or accounts bearing the name of the Hotel (the "Agency Account") in such
federally insured bank, savings and loan or trust company as may be selected by
Operator and reasonably approved by Owner. Any successor or substitute bank,
savings and loan or trust company shall be selected in the same manner. From the
Agency Account, Operator shall pay all Operating Expenses, Fixed Charges, debt
service, ground rent, capital costs and other amounts required to be paid by
Operator on Owner's behalf under this Agreement (to the extent, in each case,
such amounts are permitted or required to be paid under this Agreement). In
addition to the Agency Account, an account shall be established at the same
institution for a reserve for replacements, substitutions and additions to the
FF&E (the "FF&E Reserve Account").
8.3. The Agency Account and the FF&E Reserve Account shall be in the
name of Operator as agent for Owner and shall be under the control of Operator.
Checks or other documents of withdrawal shall be signed only by representatives
of Operator, provided that such representatives shall be bonded or otherwise
insured in a manner reasonably satisfactory to Owner. The premiums for bonding
or other insurance shall be an Operating Expense except for premiums for bonding
off-site executive employees of Operator. Upon the expiration or termination of
this Agreement all remaining amounts in the Agency Account and the FF&E Reserve
Account shall be transferred to Owner.
8.4. Any security deposit held under a Lease shall be held in a
separate account if required by law or the terms of the Lease or if otherwise
required by Owner.
ARTICLE IX
BOOKS, RECORDS AND STATEMENTS; BUDGETS
9.1. Operator shall keep full and accurate books of account and other
records reflecting the results of the operation of the Hotel in accordance with
the "Uniform System of Accounts" (Ninth Revised Edition
6
<PAGE>
1997, as further revised from time to time, except to the extent any such
revision would affect the determination of the Basic Fee under Article X) as
adopted by the American Hotel and Motel Association of the United States and
Canada ("Uniform System") with such exceptions as may be required by the
provisions of this Agreement; provided, however, that Operator may, with prior
notice to Owner, make such modifications to the methodology in the Uniform
System as are consistent with Operator's standard practice in accounting for its
operations under management contracts generally, so long as such modifications
do not affect the determination of Total Revenues, Operating Expenses or Fixed
Charges under Article XI. Except for the books and records which may be kept in
Operator's home office or other suitable location pursuant to the adoption of a
central billing system or other centralized service, the books of account and
all other records relating to or reflecting the operation of the Hotel shall be
kept at the Hotel and shall be available to Owner and its representatives at all
reasonable times for examination, audit, inspection and transcription. All of
such books and records including, without limitation, books of account, guest
records and front office records, shall be the property of Owner, shall be
treated by Operator as confidential and proprietary information of Owner and,
except as otherwise provided in this Agreement, shall not be removed from the
Hotel by Operator without Owner's prior approval. Upon any termination of this
Agreement, all of such books and records shall thereafter be available to
Operator at all reasonable times for inspection, audit, examination and
transcription for a period of three (3) years or, at Owner's option, turned over
to Operator.
9.2. Operator shall deliver to Owner within twenty (20) days after the
end of each month, the following items (collectively, the "Monthly Reports"):
A. An executive summary noting highlights of operations for
such month and explaining variances from Budgets and from the results
of a comparable period in the prior year;
B. A balance sheet as of the last day of such month with
comparison to the last day of the prior month and the last day of the
prior fiscal year;
C. A source and use of funds statement for such month;
D. An income and expense statement for such month and
year-to-date with comparison to the comparable periods of the prior
year;
E. A twelve-month summary and forecast of operations for the
current fiscal year including a projection of year-end net profit or
loss utilizing (i) actual year-to-date figures, (ii) forecasts for the
next 30, 60 and 90 day periods and (iii) budgeted amounts for the
balance of the fiscal year;
F. A twelve-month summary and forecast of cash flow for the
current fiscal year including a projection of year-end net cash flow
utilizing (i) actual year-to-date figures, (ii) forecasts for the next
30, 60 and 90 day periods and (iii) budgeted amounts for the balance of
the fiscal year;
G. A summary of outstanding accounts receivable with aging
schedule;
H. A summary of outstanding accounts payable with aging
schedule;
I. A summary of year-to-date capital expenditures and budgeted
amounts for the balance of the year;
J. To the extent not included in the foregoing, computations
of Total Revenues,
7
<PAGE>
Operating Expenses, Fixed Charges and any other amounts on which the
Incentive Fee may be based; and
K. Such other monthly reports as Owner may request and as are
customarily provided by managers of first-class, full-service hotels.
The Monthly Reports shall be (a) prepared in accordance with the Uniform System
to the extent applicable (including, but not limited to, line-item
descriptions), (b) prepared in accordance with prevailing standards for
first-class, full-service hotels to the extent the Uniform System is not
applicable, (c) certified by an officer of Operator and (d) substantially in the
form annexed to this Agreement as Exhibit B.
9.3. Year-end financial statements for the Hotel (including a balance
sheet, income statement and statement of sources and uses of funds) shall be
prepared and certified by an independent certified public accountant selected by
Owner. The year-end statements shall include computations of Total Revenue,
Operating Expenses, Fixed Charges and any other amounts on which the Incentive
Fee may be based. Operator shall cooperate in all respects with such accountant
in the preparation of such statements and shall use its best efforts to cause
such statements to delivered to Owner on or before the date ninety (90) days
after the end of each fiscal year.
9.4. On or before each December 1 during the Operating Term, Operator
shall submit to Owner for the next fiscal year the following items
(collectively, the "Budgets"):
A. An operating budget (the "Operating Budget") setting forth
in line-item detail, on a monthly basis, the projected income from and
expenses (including debt service and ground rent) of all aspects of the
operations of the Hotel;
B. A capital budget (the "Capital Budget") setting forth in
line-item detail proposed capital projects and expenditures for the
Hotel including but not limited to FF&E expenditures;
C. A cash flow forecast (the "Cash Flow Forecast") on a
monthly basis;
D. A plan (the "Marketing Plan") describing the proposed
advertising, marketing, promotion, publicity and other like programs
for the Hotel;
E. An executive summary noting highlights of the foregoing
items and commenting upon general market trends affecting the projected
operations of the Hotel; and
F. Such other reports or projections as Owner may reasonably
request and as are customarily provided by managers of first-class,
full-service hotels.
The Budgets shall (a) be prepared in accordance with the Uniform System to the
extent applicable (including, but not limited to, line-item descriptions), (b)
be prepared in accordance with prevailing standards for first-class,
full-service hotels to the extent the Uniform System is not applicable and (c)
be substantially in the form annexed to this Agreement as Exhibit B.
9.5. Owner and Operator shall meet promptly after Operator submits the
proposed Budgets to Owner. Operator shall provide any information, analysis and
explanations with respect to the proposed Budgets as Owner may request and shall
revise the proposed Budgets as necessary to reflect such changes as Owner may
require.
8
<PAGE>
9.6. Upon approval of the Budgets by Owner, Operator shall (without the
limiting the further provisions of this Section 9.6) cause the Hotel to be
operated in accordance with the Budgets. Operator shall not, without Owner's
prior approval:
A. Incur any expense for any line-item in the Operating Budget
which causes the aggregate expenditures for such line-item to exceed
the budgeted amount by 5% or more for the applicable fiscal period set
forth in the Operating Budget, provided that Operator may, without
Owner's approval, (i) pay any expenses (the "Necessary Expenses")
regardless of amount, which are necessary for the continued operation
of the Hotel and which are not within the reasonable control of
Operator (including, but not limited to, those for taxes, utility
charges and debt service) and (ii) pay any expenses (the "Emergency
Expenses") regardless of amount which, in Operator's good faith
judgment, are immediately necessary to protect the physical integrity
or lawful operation of Hotel or the health or safety of its occupants
and as to which, in Operator's good faith judgment, it is not practical
to obtain Owner's prior approval; or
B. Incur any expense for any line-item in the Capital Budget
which causes the aggregate expenditures for such line-item to exceed
the budgeted amount by 5% or more provided that Operator may, without
Owner's approval, pay any Emergency Expenses which are capital in
nature. Operator shall give Owner prompt notice of the payment of any
Emergency Expenses (whether capital in nature or otherwise); or
C. Perform any capital improvement (other than those paid for
as Emergency Expenses) not provided for in the Capital Budget.
9.7. If the Budgets (or any component of the Budgets), have not been
approved by Owner prior to any applicable fiscal year, then, until approval of
the Budgets (or such components) by Owner, Operator shall cause the Hotel to be
operated substantially in accordance with the such prior year's Budgets (other
than the Capital Budget) except for, or as modified by, (a) those components of
such Budgets for the applicable fiscal year approved by Owner, (b) the Necessary
Expenses which shall be paid as required and (c) the Emergency Expenses which
shall be paid as required.
9.8. Operator shall promptly provide to Owner any other information
(including, but not limited to, copies of bank statements, notices of claims and
legal proceedings and inventories of FF&E, Operating Equipment and Operating
Supplies) relating to the Hotel or its operations that Owner may request from
time to time or upon a standing basis.
ARTICLE X
MANAGEMENT FEES
AND PAYMENTS TO OPERATOR AND OWNER
10.1. Owner shall pay to Operator for services rendered under this
Agreement in each fiscal year a management fee (the "Basic Fee") equal to the
"Fee Percentage" of Total Revenues in such fiscal year.
10.2. The Fee Percentage shall be determined by the ratio, expressed as
a percentage, rounded down to the nearest whole number, of the Net Operating
Income for the applicable fiscal year to the projected Net Operating Income for
such fiscal year set forth in the Applicable Budget (the "Achieved NOI
Percentage"). If the Achieved NOI Percentage shall be 90% or less, then the Fee
Percentage shall be two
9
<PAGE>
percent (2%). If the Achieved NOI Percentage shall be 110% or more, then the Fee
Percentage shall be four percent (4%). If the Achieved NOI Percentage shall be
more than 90% and less than 110%, then the Fee Percentage shall be the sum of
(a) two percent (2%) plus (b) the product of (x) one-tenth of a percent (.1%)
and (y) the difference between the Achieved NOI Percentage and 90%. For example,
if the Achieved NOI Percentage is 98%, the Fee Percentage shall be 2.8% (2% plus
(.1% x [98-90]).
10.3. In each month during the Operating Term, Operator shall be paid
out of the Agency Account the Basic Fee for the preceding month on an estimated
basis. Such estimated payment shall be equal to the Fee Percentage (based upon
the year-to-date Achieved NOI Percentage) of year-to-date Total Revenues minus
the Basic Fee previously paid to Operator with respect to the applicable fiscal
year. Each monthly payment shall be made upon delivery of the income and expense
statement for such month showing the computation of Total Revenues and the Basic
Fee for such month.
10.4. On or before the twentieth (20th) day following the last day of
each calendar quarter (or such other fiscal period as Owner may determine) of
each fiscal year during the Operating Term, after (a) payment of Operating
Expenses and other amounts required to be paid under this Agreement, (b)
deposits to the FF&E Reserve Account in accordance with the Budget and (c)
retention of working capital sufficient to assure the uninterrupted and
efficient operation of the Hotel, in accordance with the most recently approved
Cash Flow Forecast, all funds in the Agency Account shall be paid to Owner.
10.5. At the end of each fiscal year and following receipt by Owner of
the annual audit set forth in Section 9.3, an adjustment will be made, if
necessary, based on the audit so that Operator shall have received the accurate
Basic Fee for such fiscal year. Within thirty (30) days of receipt by Owner and
Operator of such audit, Operator shall either (a) place in the Agency Account or
remit to Owner, as appropriate, any excess amounts Operator may have received
for during such calendar year or (b) be paid out of the Agency Account or by
Owner, as appropriate, any deficiency in the amounts due Operator for the Basic
Fee.
10.6. In addition to the Basic Fee, Owner shall pay to Operator on a
monthly basis a fee for centralized accounting services equal to $2,500 per
month (the "Accounting Fee").
10.6. The compensation provided for in this Article X together with the
payments to Operator set forth in Sections 7.2 and 11.2(A)(ix) shall be the only
compensation payable to Operator for its services under this Agreement.
ARTICLE XI
CERTAIN DEFINITIONS
11.1. A. The term "Total Revenues" shall mean all income, revenue and
proceeds resulting from the operation of the Hotel and all of its facilities
(net of refunds and credits to guests and other items deemed "Allowances" under
the Uniform System) which are properly attributable under the Uniform System to
the period in question. Subject to Section 11.1B, Total Revenues shall include,
without limitation, all amounts derived from:
(i) The rentals of rooms, banquet facilities and conference
facilities;
(ii) The sale of food and beverage whether sold in a bar,
lounge or restaurant, delivered
10
<PAGE>
to a guest room, sold through an in-room facility or vending machines,
provided in meeting or banquet rooms or sold through catering
operations;
(iii) Charges for admittance to or the use of any recreational
facilities or any entertainment events at the Hotel;
(iv) Rentals paid under Leases to the extent such Leases cover
premises used as newsstands, restaurants, bars, lounges, gift and
sundry shops, barber shops and beauty salons or otherwise to provide
services and merchandise to Hotel guests or which are customarily
provided to guests at hotels similar in character to the Hotel (it
being agreed that, with respect to other Leases, Operator shall be
compensated in amounts agreed upon by Owner and Operator, which amounts
shall fairly reflect the time and effort expended by Operator in
connection with such Leases);
(v) Charges for other Hotel services or amenities, including,
but not limited to, telephone service, in-room movies, and laundry
services; and
(vi) The proceeds of business interruption or similar
insurance.
B. Total Revenues shall not include:
(i) Sales or use taxes or similar governmental impositions
collected by Owner or Operator;
(ii) Tips, service charges and other gratuities received by
Hotel Employees;
(iii) Proceeds of insurance except as set forth in Section
11.1A;
(iv) Proceeds of the sale or condemnation of the Hotel, any
interest therein or any other asset, or the proceeds of any loans or
financings;
(v) Capital contributed to Owner or the Hotel;
(vi) The repayment of any loans or interest thereon made by
Owner other than in the ordinary course of Hotel operations;
(vii) The receipts of any tenant, licensee or concessionaire
under a Lease;
(viii) The proceeds of any judgments, awards or settlements
except to the extent the same represent (a) recoveries of any items set
forth in Section 11.1A or (b) the recoupment of any amount paid as an
Operating Expense or Fixed Charge; and
(ix) Interest earned on the Agency Account (which is excluded
for purposes of determining the Basic Fee but shall be available to pay
any amounts which may be paid from Total Revenues under this Agreement)
or the FF&E Reserve Account (which is excluded for purposes of
determining the Basic Fee but shall be available to pay for
replacements substitutions and additions to the FF&E).
11.2 A. The term "Operating Expenses" shall mean all costs and expenses
of maintaining, conducting and supervising the operation of the Hotel and all of
its facilities which are properly attributable
11
<PAGE>
under the Uniform System to the period in question. Operating Expenses shall
include, without limitation:
(i) The cost of all Operating Equipment and Operating
Supplies;
(ii) Salaries and wages of Hotel personnel, including costs of
payroll taxes and employee benefits. The salaries or wages of off-site
employees or executives of Operator shall not be Operating Expenses,
provided that if it becomes necessary for an off-site employee or
executive of Operator to temporarily perform services on an emergency
basis at the Hotel of a nature normally performed by Hotel Employees,
his salary (including payroll taxes and employee benefits) for such
period only as well as his traveling expenses shall be Operating
Expenses;
(iii) The cost of all other goods and services obtained in
connection with the operation of the Hotel including, without
limitation, heat and utilities, laundry, landscaping and exterminating
services and office supplies;
(iv) The cost of all repairs to and maintenance of the Hotel;
(v) Insurance premiums (or the allocable portion thereof in
the case of blanket policies) for all insurance maintained under
Article XIII (other than insurance against physical damage to the
Hotel) and losses incurred on any self-insured risks (including
deductibles);
(vi) All taxes, assessments, permit fees, inspection fees, and
water and sewer charges and other charges (other than income or
franchise taxes) payable by or assessed against Owner with respect to
the operation of the Hotel, excluding Property Taxes (as defined in
Section 11.3);
(vii) Legal fees and fees of any independent certified public
accountant for services directly related to the operation of the Hotel
and its facilities;
(viii) All expenses for advertising the Hotel and all expenses
of sales promotion and public relations activities;
(ix) All out-of-pocket expenses and disbursements reasonably
incurred by Operator, pursuant to, in the course of, and directly
related to, the management and operation of the Hotel under this
Agreement to the extent the same are contained in an approved Budget.
Without limiting the generality of the foregoing, such charges may
include all reasonable travel, telephone, telegram, facsimile, air
express and other incidental expenses, but, except as otherwise
provided in this Agreement, shall not include any of the regular
expenses of the central offices maintained by Operator, other than
offices maintained at the Hotel for the management of the Hotel.
Operator shall maintain and make available to Owner invoices or other
evidence supporting such charges;
(x) The Basic Fee and the Accounting Fee;
(xi) Payments under any applicable franchise agreement;
(xii) Any other item specified as an Operating Expense in this
Agreement; and
(xiii) Any other cost or charge classified as an Operating
Expense or an Administrative and General Expense under the Uniform
System unless specifically excluded under the provisions of this
Agreement.
12
<PAGE>
B. Operating Expenses shall not include:
(i) Amortization and depreciation;
(ii) The making of or the repayment of any loans or any
interest thereon;
(iii) The costs of any alterations, additions or improvements
which for Federal income tax purposes must be capitalized and amortized
over the life of such alteration addition or improvement;
(iv) Payments into the FF&E Reserve Account; or
(v) Any item defined as a Fixed Charge in Section 11.3.
11.3. "Fixed Charges" shall mean the cost of the following items
relating to the Hotel or its facilities which are properly attributable under
the Uniform System to the period in question:
(i) Real estate taxes, assessments, personal property taxes
and any other ad valorem taxes imposed on or levied in connection with
the Hotel, the Installations and the FF&E (collectively, "Property
Taxes");
(ii) Insurance against physical damage to the Hotel; and
(iii) Rental payments or payments for purchase options under
leases of equipment which are capital leases under the Uniform System;
11.4. "Net Operating Income" for any period shall mean the amount, if
any, by which Total Revenues for such period exceed the sum of (a) Operating
Expenses, (b) Fixed Charges and (c) an FF&E Reserve equal to 4% of Total
Revenues (whether or not such FF&E Reserve is actually funded) for such period.
11.5. "Fiscal year" shall mean each calendar year or partial calendar
year within the Operating Term unless Owner and Operator otherwise agree.
ARTICLE XII
FF&E RESERVE
12.1. During each fiscal year there shall be allocated and paid to the
FF&E Reserve Account (to the extent available from Total Revenues or funds
provided by Owner (at its option) after payment of Operating Expenses, Fixed
Charges, debt service, ground rent and capital costs) such amount as is
reflected in the applicable Budget for such fiscal year. Subject to the
availability of funds, payments into the FF&E Reserve Account shall be made on a
monthly or other basis as set forth in the Cash Flow Forecast.
12.2. All funds in the FF&E Reserve Account, together with any interest
earned thereon and the proceeds of any sale of FF&E (which proceeds shall be
deposited in the FF&E Reserve Account) shall be used solely for purposes of
replacing or refurbishing the FF&E in accordance with the applicable Capital
Budget.
13
<PAGE>
ARTICLE XIII
INSURANCE
13.1. Throughout the Operating Term of this Agreement, Operator shall
arrange for and maintain the following insurance in connection with the Hotel:
A. Insurance covering the Building, the Installations and the
FF&E on an all-risk, broad form basis, against such risks as are
customarily covered by such insurance (including, without limitation,
boiler and machinery insurance, but excluding, at Owner's discretion,
damage resulting from earthquake, war, and nuclear energy), in
aggregate amounts which shall be not less than the full replacement
cost of the Building, the Installations and the FF&E (exclusive of
foundations and footings);
B. Commercial general liability insurance (including broad
form endorsement and coverage against liability arising out of the
ownership or operation of motor vehicles) with a combined single limit
of not less than $25,000,000 for each occurrence for liability for (i)
bodily injury, (ii) death, (iii) property damage, (iv) assault and
battery, (v) false arrest, detention or imprisonment or malicious
prosecution, (vi) libel, slander, defamation or violation of the right
of privacy, (vii) wrongful entry or eviction, or (viii) liquor law or
dram shop liability;
C. Worker's compensation insurance or insurance required by
similar employee benefit acts having a minimum per occurrence limit as
Owner may deem advisable against all claims which may be brought for
personal injury or death of Hotel employees, but in any event not less
than amounts prescribed by applicable state law;
D. Fidelity bonds, in such amounts and with such deductibles
as Owner may require, covering Operator's employees at the Hotel (other
than executive employees of Operator) or in job classifications
normally bonded in other hotels it manages in the United States or
otherwise required by law, and comprehensive crime insurance to the
extent that Owner determines is necessary for the Hotel;
E. Business interruption insurance covering loss of income for
a minimum period of six (6) months resulting from interruption of
business caused by the occurrence of any of the risks insured against
under "all-risk" policy referred to in Section 15.1A;
F. If elected by Owner pursuant to Section 5.5 of this
Agreement, Employment Insurance with reasonable limits and deductibles
to be determined by Owner;
G. If the Hotel is located within an area designated "flood
prone" pursuant to the National Flood Insurance Act of 1968 and the
Flood Disaster Protection Act of 1973, as the same may be amended from
time to time, flood insurance in such amount as Owner may require; and
H. Such other or additional insurance as may be (i) required
under the provisions of any applicable mortgage, deed of trust, ground
lease or franchise agreement (collectively, "Major Agreements") or (ii)
customarily carried by prudent operators of first-class, full-service
hotels in the geographic area of the Hotel.
14
<PAGE>
13.2. All insurance policies shall name Owner as the insured party and
shall name as additional insureds Operator and such other parties as may be
required by the terms of the Major Agreements as appropriate.
13.3. All insurance policies shall be in such form and with such
companies as shall be reasonably satisfactory to Owner and shall comply with the
requirements of any Major Agreement. Insurance may (at Owner's election or with
Owner's prior approval) be provided under blanket or master policies covering
one or more other hotels operated by Operator or owned by Owner. The portion of
the premium for any blanket or master policy which is allocated to the Hotel as
an Operating Expense or Fixed Charge shall be determined in an equitable manner
by Operator and reasonably approved by Owner.
13.4. The originals of all insurance policies or certificates thereof
shall be delivered to Owner on the Commencement Date and thereafter not less
than twenty (20) days prior to the expiration date of the policies then in
force. All such policies shall specify that they cannot be canceled or modified
on less than twenty (20) days prior written notice to both Owner and Operator
and any additional insureds (or such longer period as may be required under a
Major Agreement) and shall provide that claims shall be paid notwithstanding any
act or negligence of Owner or Operator or their respective agents or employees.
13.5. All insurance policies shall provide that the insurance company
will have no right of subrogation against Owner, Operator any party to a Major
Agreement or any of their respective agents, employees, partners, members,
officers, directors or beneficial owners.
13.6. Owner and Operator hereby release one another from any and all
liability associated with any damage, loss or liability with respect to which
property insurance coverage is provided pursuant to this Article or otherwise.
13.7. The proceeds of any insurance claim (other than proceeds payable
to third parties under the terms of the applicable policy) shall be paid into
the Agency Account unless otherwise required by the terms of a Major Agreement.
ARTICLE XIV
PROPERTY TAXES
14.1. Operator shall pay all Property Taxes on behalf of Owner not less
than ten (10) days prior to the applicable due dates. Operator shall promptly
furnish Owner with proof of payment of Property Taxes. If funds are available in
the Agency Account to timely pay Property Taxes but Operator shall fail to
timely pay such Property Taxes, any fines, penalties or interest charges
resulting from such failure shall be paid by Operator and shall not be
considered Operating Expenses.
14.2. Operator shall from time to time advise Owner of the desirability
of contesting the validity or amount of any Property Tax (a "Tax Contest").
Owner may, whether or not Operator so recommends, pursue a Tax Contest, and
Operator agrees to cooperate with Owner in a Tax Contest and execute any
documents or pleadings required for such purpose, provided that the facts set
forth in such documents or pleadings are accurate and that such cooperation or
execution does not impose any liability on Operator. All costs and expenses
incurred by Owner and Operator in connection with a Tax Contest shall be
Operating Expenses.
15
<PAGE>
ARTICLE XV
DAMAGE OR DESTRUCTION; CONDEMNATION
15.1. If the Hotel is damaged by fire or other casualty, Operator shall
promptly notify Owner. Operator shall cooperate with and assist Owner in
evaluating the extent of the damage, filing and pursuing insurance claims,
developing plans for the restoration of the Hotel and modifying the applicable
Budgets to reflect the effect of the casualty on operations. This Agreement
shall remain in full force and effect subsequent to such casualty provided that
Owner may terminate this Agreement upon thirty days prior notice to Operator if
(a) Owner shall elect to close the Hotel as a result of such casualty (except on
a temporary basis for repairs or restoration) or (b) Owner shall determine in
good faith not to proceed with the restoration of the Hotel.
15.2. If all or any portion of the Hotel becomes the subject of a
condemnation proceeding or if Operator learns that any such proceeding may be
commenced, Operator shall promptly notify Owner. Operator shall cooperate with
and assist Owner in evaluating the effect of the condemnation, pursuing any
negotiation, litigation, administrative action or appeal relating to the
condemnation award, developing plans for the restoration of the Hotel and
modifying the applicable Budgets to reflect the effect of the condemnation on
operations.
15.3. Either party may terminate this Agreement on thirty (30) days
notice to the other party if (a) all or substantially all of the Hotel is taken
through condemnation or (b) less than all or substantially all of the Hotel is
taken, but, in the reasonable judgment of the party giving the termination
notice, the Hotel cannot, after giving effect to any restoration as might be
reasonably accomplished through available funds from the condemnation award, be
profitably operated as a first-class, full-service hotel.
15.4. Any condemnation award or similar compensation shall be the
property of Owner, provided that Operator shall have the right to bring a
separate proceeding against the condemning authority for any damages and
expenses specifically incurred by Operator as a result of such condemnation.
ARTICLE XVI
EVENTS OF DEFAULT
16.1. The following shall constitute events of default:
A. If either party shall be in default in the payment of any
amount required to be paid under the terms of this Agreement, and such
default continues for a period of ten (10) after written notice from
the other party;
B. If either party shall be in material default in the
performance of its other obligations under this Agreement, and such
default continues for a period of thirty (30) days after written notice
from the other party, or if Operator shall consistently and willfully
refuse to follow instructions of Owner with respect to the operation of
the Hotel, provided that if such default cannot by its nature
reasonably be cured within such thirty-day period, an event of default
shall not occur if and so long as the defaulting party promptly
commences and diligently pursues the curing of such default;
C. If either party shall (i) make an assignment for the
benefit of creditors, (ii) institute
16
<PAGE>
any proceeding seeking relief under any federal or state bankruptcy or
insolvency laws, (iii) institute any proceeding seeking the appointment
of a receiver, trustee, custodian or similar official for its business
or assets or (iv) consent to the institution against it of any such
proceeding by any other person or entity (an "Involuntary Proceeding");
or
D. If an Involuntary Proceeding shall be commenced against
either party and shall remain undismissed for a period of sixty (60)
days.
16.2. In addition to the events of default described in Section 16.1,
it shall be an event of default on the part of Operator if Operator shall commit
any act of fraud, defalcation or breach of fiduciary duty.
16.3. If any event of default shall occur, the non-defaulting party may
terminate this Agreement on five (5) days prior notice to the defaulting party.
16.4. The right of termination set forth in Section 16.3, shall not be
in substitution for, but shall be in addition to, any and all rights and
remedies for breach of contract available in law or at equity.
16.5. Neither party shall be deemed to be in default of its obligations
under this Agreement if and to the extent that such party is unable to perform
such obligation as a result of fire or other casualty, act of God, strike or
other labor unrest, unavailability of materials, war, riot or other civil
commotion or any other cause beyond the control of such party (which shall not
include the inability of such party to meet its financial obligations).
ARTICLE XVII
SPECIAL TERMINATION RIGHTS
17.1. (a) Owner (or the applicable transferee) may terminate this
Agreement upon thirty (30) prior notice to Operator in the event of (a) a sale
or other transfer (including a foreclosure or deed-in-lieu of foreclosure) of
the Hotel to a person or entity that is not an "Affiliate" (as defined in the LP
Agreement) of Fee Owner or of any of their respective members or partners or (b)
the sale or other transfer, direct or indirect, of a controlling interest in Fee
Owner to a person or entity that is not an Affiliate of Fee Owner or of any of
their respective members or partners. For purposes of the foregoing, the term
"controlling interest" shall be determined by reference to the term "control" as
set forth in the definition of "Affiliate" in the LP Agreement. Any termination
under this Section 17.1 shall be effective on the date of the closing of the
applicable sale or other transfer.
(b) If Owner shall terminate this Agreement pursuant to Section 17.1(a)
prior to the second anniversary of the Commencement Date, then Owner shall pay
to Operator on the date of termination, a termination fee equal to the product
of (i) the average monthly Basic Fee payable to Operator from the Commencement
Date through the date of termination and (ii) the number of whole and partial
months from the date of termination through the second anniversary of the
Commencement Date. No termination fee shall be payable to Operator with respect
to any termination of this Agreement pursuant to Section 17.1(a) after the
second anniversary of the Commencement Date.
17.2. Owner may terminate this Agreement upon thirty (30) days prior
notice to Operator without payment of any penalty in the event that (a) either
"Opco GP" or "Opco LP" becomes a "Non-Qualified
17
<PAGE>
Member" (as such terms are defined in the LP Agreement) or (b) Opco GP and Opco
LP shall have transferred their interests in owner in violation of Section 14.1
of the LP Agreement or (c) pursuant to Section 14.9 of the LP Agreement.
17.3. Upon the expiration or earlier termination of this Agreement,
Operator shall cooperate with Owner in all reasonable respects in transferring
management of the Hotel (including all books, records and assignable permits) to
Owner or another management company with as little hindrance to the operations
of the Hotel as practicable. Without limiting the generality of the foregoing,
Operator shall at Owner's request continue to manage the Hotel under this
Agreement for such period as Owner may request after the date of such expiration
or termination upon all of the terms and conditions of this Agreement.
ARTICLE XVIII
ASSIGNMENT
18.1. Operator shall not assign, pledge or encumber this Agreement or
its interest in this Agreement, voluntarily or by operation of law, without the
prior consent of Owner, provided, however, that upon prior written notice to
owner, Operator may assign this Agreement to any entity to which Opco GP or Opco
LP is permitted to transfer its partnership interest in Owner pursuant to
Section 14.2 of the LP Agreement.
18.2. Owner shall not assign this Agreement without the prior consent
of Operator, provided that Owner may assign this Agreement without Operator's
consent to any person or entity acquiring Owner's fee or leasehold interest in
the Hotel (by arms'-length purchase, foreclosure, deed-in-lieu of foreclosure or
otherwise) if such assignee shall agree in writing to be bound by this Agreement
and to assume all of Owner's obligations under this Agreement from and after the
effective date of the assignment.
18.3. Upon any permitted assignment of this Agreement and the
assumption of this Agreement by the assignee, the assignor shall be relieved of
any obligation or liability under this Agreement arising after the effective
date of the assignment.
ARTICLE XIX
NOTICES
19.1. Any notice, statement or demand required to be given under this
Agreement shall be in writing, sent by certified mail, postage prepaid, return
receipt requested, or by facsimile transmission, receipt electronically or
verbally confirmed, or by nationally-recognized overnight courier, receipt
confirmed, addressed if to:
Owner: 1010 Wisconsin Avenue
Washington, D.C. 20007
Attention: Mr. Paul Whetsell
Facsimile No.: (202)295-2248
18
<PAGE>
with a copy to:
Oak Hill Partners, Inc.
65 East 55th Street
32nd Floor
New York, New York 10022
Attention: Mr. Daniel Doctoroff
Facsimile No.: (212)754-5685
and Operator: 1010 Wisconsin Avenue
Washington, D.C. 20007
Attention: Mr. Paul Whetsell
Facsimile No.: (202)295-2248
or to such other addresses as Operator and Owner shall designate in the manner
provided in this Section 19.1. Any notice or other communication shall be deemed
given (a) on the date three (3) business days after it shall have been mailed,
if sent by certified mail, (b) on the business day it shall have been sent by
facsimile transmission (unless sent on a non-business day or after business
hours in which event it shall be deemed given on the following business day), or
(c) on the date received if it shall have been given to a nationally-recognized
overnight courier service.
ARTICLE XX
SUBORDINATION; ESTOPPELS
20.1. Operator acknowledges and agrees that its rights under this
Agreement are subject and subordinate to the lien of any mortgage or deed of
trust encumbering the Hotel whether now or hereafter existing. Operator agrees
to execute and deliver promptly any document or certificate confirming such
subordination as Owner or the holder of any such lien may reasonably request.
20.2. If any person or entity making or holding a loan to be secured by
a mortgage or deed of trust encumbering the Hotel shall request that Operator
agree to modifications of this Agreement, Operator shall enter into an agreement
setting forth such modifications provided that the same do not materially and
adversely affect the rights of Operator under this Agreement. Such modifications
may include, but shall not be limited to, Operator's agreement to give notice
of, and the opportunity to cure, any defaults on the part of Owner to such
person or entity.
20.3. Owner and Operator agree that from time to time upon the request
of the other party or a party to a Major Agreement, it shall execute and deliver
within ten (10) days after the request a certificate confirming that this
Agreement is in full force and effect, stating whether this Agreement has been
modified and supplying such other information as the requesting party may
reasonably require.
19
<PAGE>
ARTICLE XXI
INDEMNIFICATION
21.1. Operator shall indemnify and hold Owner (and Owner's agents,
principals, shareholders, partners, members, officers, directors and employees)
harmless from and against all liabilities, losses, claims, damages, costs and
expenses (including, but not limited to, reasonable attorneys' fees and
expenses) that may be incurred by or asserted against any such party and that
arise from (a) the fraud, wilful misconduct or gross negligence of the executive
or off-site employees of Operator, (b) the breach by Operator of any provision
of this Agreement or (c) any action taken by Operator which is beyond the scope
of Operator's authority under this Agreement. Owner shall promptly provide
Operator with written notice of any claim or suit brought against it by a third
party which might result in such indemnification and Operator shall have the
option of defending any claim or suit brought against the Owner with counsel
selected by Operator and reasonably approved by Owner. Owner shall cooperate
with the Operator or its counsel in the preparation and conduct of any defense
to any such claim or suit.
21.2. Except as provided in Section 21.1, Owner shall indemnify and
hold Operator (and Operator's agents, principals, shareholders, partners,
members, officers, directors and employees) harmless from and against all
liabilities, losses, claims, damages, costs and expenses (including, but not
limited to, reasonable attorneys' fees and expenses) that may be incurred by or
asserted against such party and that arise from or in connection with (a) the
performance of Operator's services under this Agreement, (b) any act or omission
(whether or not wilful, tortious, or negligent) of Owner or any third party or
(c) or any other occurrence related to the Hotel whether arising before, during
or after the Operating Term. Operator shall promptly provide Owner with written
notice of any claim or suit brought against it by a third party which might
result in such indemnification and Owner shall have the option of defending any
claim or suit brought against Operator with counsel selected by Owner and
reasonably satisfactory to Operator. Operator shall cooperate with the Owner or
its counsel in the preparation and conduct of any defense to any such claim or
suit.
21.3. Supplementing the provisions of Sections 21.1 and 21.2, if any
claim shall be made against Owner and/or Operator which is based upon a
violation or alleged violation of the Employment Laws (an "Employment Claim"),
the Employment Claim shall fall within Operator's indemnification obligations
under Section 21.1 only if it is based upon (a) the wilful misconduct or gross
negligence of Operator's executive employees (including such wilful misconduct
or gross negligence as may arise in the hiring, supervision or dismissal of any
Hotel Employee) or (b) Operator's breach of its obligations under Section 5.6
and shall otherwise fall within Owner's indemnification obligations under
section 21.2.
21.4. The provisions of this Article shall survive the termination of
this Agreement with respect to acts, omissions and occurrences arising during
the Operating Term.
ARTICLE XXII
MISCELLANEOUS
22.1. Owner and Operator shall execute and deliver all other
appropriate supplemental agreements and other instruments, and take any other
action necessary to make this Agreement fully and legally effective, binding,
and enforceable as between them and as against third parties.
20
<PAGE>
22.2. This Agreement constitutes the entire agreement between the
parties relating to the subject matter hereof, superseding all prior agreements
or undertakings, oral or written. Owner acknowledges that in entering into this
Agreement Owner has not relied on any projection of earnings, statements as to
the possibility of future success or other similar matter which may have been
prepared by Operator.
22.3. The headings of the titles to the several articles of this
Agreement are inserted for convenience only and are not intended to affect the
meaning of any of the provisions hereof.
22.4. A waiver of any of the terms and conditions of this Agreement may
be made only in writing and shall not be deemed a waiver of such terms and
conditions on any future occasion.
22.5. This Agreement shall be binding upon and inure to the benefit of
Owner and Operator and their respective successors and permitted assigns.
22.6. This Agreement shall be construed, both as to its validity and as
to the performance of the parties, in accordance with the laws of the state in
which the Hotel is located.
IN WITNESS WHEREOF, Operator and Owner have duly executed this
Agreement the day and year first above written.
MIP LESSEE, L.P.
By: MIP GP, LLC
general partner
By: MeriStar H&R Operating Company, L.P.
member
By: MeriStar Hotels & Resorts, Inc.
general partner
By: /s/ JOHN EMERY
--------------------------------
MERISTAR MANAGEMENT COMPANY, L.L.C.
By: MeriStar H&R Operating Company, L.P.
member
By: MeriStar Hotels & Resorts, Inc.
general partner
By: /s/ JOHN EMERY
--------------------------------
21
<PAGE>
EXHIBIT C
---------
LEASE AGREEMENT
DATED AS OF MARCH 31, 1999
BETWEEN
MIP _______________, LLC
AS LESSOR
AND
MIP LESSEE, LP
AS LESSEE
[____________________]
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
ARTICLE I.....................................................................1
1.1 Leased Property.................................................1
1.2 Term ..........................................................2
1.3 Initial Transaction.............................................3
ARTICLE II....................................................................3
2.1 Definitions.....................................................3
ARTICLE III..................................................................16
3.1 Rent .........................................................16
3.2 Confirmation of Participating Rent.............................21
3.3 Additional Charges.............................................21
3.4 No Set Off.....................................................22
3.5 Annual Budget..................................................22
3.6 Books and Records..............................................24
3.7 Hotel Operations...............................................24
3.8 Allocation of Revenues.........................................25
ARTICLE IV...................................................................25
4.1 Payment of Impositions.........................................25
4.2 Notice and Accrual of Impositions..............................26
4.3 Adjustment of Impositions......................................27
4.4 Utility Charges................................................27
4.5 Franchise Fees.................................................27
4.6 Ground Rent....................................................27
ARTICLE V....................................................................27
5.1 No Termination, Abatement, etc.................................27
ARTICLE VI...................................................................28
6.1 Ownership of the Leased Property...............................28
6.2 Lessee's Personal Property.....................................28
ARTICLE VII..................................................................29
7.1 Condition of the Leased Property...............................29
7.2 Use of the Leased Property.....................................29
7.3 Lessor to Grant Easements, etc.................................30
-i-
<PAGE>
PAGE
ARTICLE VIII.................................................................31
8.1 Compliance with Legal and Insurance Requirements, etc..........31
8.2 Legal Requirements Covenants...................................31
8.3 Environmental Covenants........................................32
ARTICLE IX...................................................................34
9.1 Maintenance and Repair.........................................34
ARTICLE X....................................................................35
10.1 Alterations...................................................35
10.2 Salvage.......................................................36
10.3 Lessor Alterations............................................36
ARTICLE XI...................................................................36
11.1 Liens.........................................................36
ARTICLE XII..................................................................37
12.1 Permitted Contests............................................37
ARTICLE XIII.................................................................38
13.1 General Insurance Requirements................................38
13.2 Replacement Cost..............................................40
13.3 Waiver of Subrogation.........................................40
13.4 Form Satisfactory, etc........................................40
13.5 Increase in Limits............................................41
13.6 Blanket Policy................................................41
13.7 Separate Insurance............................................41
13.8 Reports on Insurance Claims...................................41
ARTICLE XIV..................................................................42
14.1 Insurance Proceeds............................................42
14.2 Reconstruction in the Event of Damage or Destruction
Covered by Insurance.........................................42
14.3 Reconstruction in the Event of Damage or Destruction
Not Covered by Insurance.....................................42
14.4 Lessee's Property and Business Interruption Insurance.........43
14.5 Abatement of Rent.............................................43
ARTICLE XV...................................................................43
15.1 Definitions...................................................43
15.2 Parties' Rights and Obligations...............................43
15.3 Total Taking..................................................44
-ii-
<PAGE>
PAGE
15.4 Allocation of Award...........................................44
15.5 Partial Taking................................................44
15.6 Temporary Taking..............................................45
ARTICLE XVI..................................................................45
16.1 Events of Default.............................................45
16.2 Remedies......................................................47
16.3 Waiver........................................................48
16.4 Application of Funds..........................................49
ARTICLE XVII.................................................................49
17.1 Lessor's Right to Cure Lessee's Default.......................49
ARTICLE XVIII................................................................49
18.1 Personal Property Limitation..................................49
18.2 Sublease Rent Limitation......................................50
18.3 Sublease Lessee Limitation....................................50
18.4 Lessee Ownership Limitation...................................50
ARTICLE XIX..................................................................50
19.1 Holding Over..................................................50
ARTICLE XX...................................................................51
20.1 Indemnification...............................................51
ARTICLE XXI..................................................................52
21.1 Subletting, Assignment and Change in Control..................52
21.2 Attornment....................................................52
ARTICLE XXII.................................................................53
22.1 Officer's Certificates; Financial Statements; Lessor's
Estoppel Certificates and Covenants...........................53
ARTICLE XXIII................................................................55
23.1 Lessor's Right to Inspect.....................................55
ARTICLE XXIV.................................................................55
24.1 No Waiver.....................................................55
ARTICLE XXV..................................................................55
25.1 Remedies Cumulative...........................................55
-iii-
<PAGE>
PAGE
ARTICLE XXVI.................................................................56
26.1 Acceptance of Surrender.......................................56
ARTICLE XXVII................................................................56
27.1 No Merger of Title............................................56
ARTICLE XXVIII...............................................................56
28.1 Conveyance by Lessor..........................................56
28.2 Mortgages.....................................................56
ARTICLE XXIX.................................................................58
29.1 Quiet Enjoyment...............................................58
ARTICLE XXX..................................................................59
30.1 Notices.......................................................59
ARTICLE XXXI.................................................................60
31.1 Appraisers....................................................60
ARTICLE XXXII................................................................61
32.1 Security Assignment of Agreements............................61
ARTICLE XXXIII...............................................................62
33.1 Miscellaneous.................................................62
33.2 Transition Procedures.........................................62
33.3 Standard of Discretion........................................63
33.4 Action for Damages............................................63
33.5 Limitation on Liability.......................................64
ARTICLE XXXIV................................................................64
34.1 Memorandum of Lease...........................................64
ARTICLE XXXV.................................................................64
[Intentionally Omitted.]............................................64
ARTICLE XXXVI................................................................64
36.1 Lessor's Option to Terminate Lease............................64
ARTICLE XXXVII...............................................................66
37.1 Compliance with Franchise Agreement...........................66
-iv-
<PAGE>
PAGE
ARTICLE XXXVIII..............................................................67
38.1 Capital Expenditures..........................................67
ARTICLE XXXIX................................................................68
39.1 Lessor's Default..............................................68
39.2 Limitation of Lessor's Liability..............................69
ARTICLE XL ARBITRATION......................................................69
40.1 Arbitration...................................................69
40.2 Alternative Arbitration.......................................69
40.3 Arbitration Procedures........................................70
Exhibit A: Other Properties
Exhibit B: Land
Exhibit C: Base Rent; Calculation of Participating Rent and Portion of Rent
Attributable to Franchise
Exhibit D: FF&E Note
-v-
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT (hereinafter called "Lease"), made as of
the ______ day of March, 1999, by and between MIP ___________, LLC, a Delaware
limited liability company (hereinafter called "Lessor"), and MIP LESSEE, LP, a
Delaware limited partnership (hereinafter called "Lessee"), provides as follows:
W I T N E S S E T H:
Lessor owns either fee title or a leasehold estate in and to
the Leased Property (defined below). Lessor and certain Affiliates of Lessor own
or lease (or will own or lease) certain Other Properties listed on Exhibit "A"
attached hereto. Contemporaneously with or prior to (or after) the execution of
this Lease, Lessor and such Affiliates are entering into or have entered into
(or will enter into) the Other Leases with Lessee (and/or Affiliates of Lessee).
In furtherance of such series of transactions, Lessor and
Lessee wish to enter into this Lease.
NOW, THEREFORE, Lessor, in consideration of the payment of
rent by Lessee to Lessor, the covenants and agreements to be performed by
Lessee, and upon the terms and conditions hereinafter stated, does hereby rent
and lease unto Lessee, and Lessee does hereby rent and lease from Lessor, the
Leased Property.
ARTICLE I
1.1 Leased Property. The leased property (the "Leased
Property") is comprised of Lessor's interest in and to the following:
(a) the land described in Exhibit "B" attached hereto and by
reference incorporated herein (the "Land");
(b) all buildings, structures and other improvements of every
kind including, but not limited to, alleyways and connecting tunnels, sidewalks,
utility pipes, conduits and lines (on-site and off-site), parking areas and
roadways appurtenant to such buildings and structures presently situated upon
the Land (collectively, the "Leased Improvements");
(c) all easements, rights and appurtenances relating to the
Land and Leased Improvements;
(d) all appliances, equipment, machinery, devices, fixtures,
and other items of property required for or incidental to the use of the Leased
Improvements as a hotel, including all components thereof, now and hereafter
permanently affixed to or incorporated into
-1-
<PAGE>
the Leased Improvements, including, without limitation, all furnaces, boilers,
heaters, electrical equipment, heating, plumbing, lighting, ventilating,
refrigerating, incineration, air and water pollution control, waste disposal,
air-cooling and air-conditioning systems and apparatus, sprinkler systems and
fire and theft protection equipment, all of which to the greatest extent
permitted by law are hereby deemed by the parties hereto to constitute real
estate, together with all replacements, modifications, alterations and additions
thereto (collectively, the "Fixtures");
(e) all furniture and furnishings and all other items of
personal property (excluding Inventory and Lessee's Personal Property) located
on, and used in connection with, the operation of the Leased Improvements as a
hotel, together with all replacements, modifications, alterations and additions
thereto;
(f) all existing leases of the Leased Property (including any
security deposits or collateral held by Lessor pursuant thereto); and
(g) any rights of Lessor in and to the Franchise Agreement
with respect to the Facility.
THE LEASED PROPERTY IS DEMISED IN ITS PRESENT CONDITION WITHOUT REPRESENTATION
OR WARRANTY (EXPRESSED OR IMPLIED) BY LESSOR AND SUBJECT TO THE RIGHTS OF
PARTIES IN POSSESSION, AND TO THE EXISTING STATE OF TITLE INCLUDING ALL
COVENANTS, CONDITIONS, RESTRICTIONS, EASEMENTS AND OTHER MATTERS OF RECORD
INCLUDING ALL APPLICABLE LEGAL REQUIREMENTS AND MATTERS WHICH WOULD BE DISCLOSED
BY AN INSPECTION OF THE LEASED PROPERTY OR BY AN ACCURATE SURVEY THEREOF.
1.2 Term.
(a) The term of the Lease (the "Initial Term") shall
commence on the Commencement Date and shall end on the fifth (5th) anniversary
of the last day of the month prior to the month in which the Commencement Date
occurs, unless sooner terminated in accordance with the provisions hereof.
(b) Provided that Lessee is not then in default under
this Lease, and provided that a Tax Law Change has not occurred, Lessee shall
have the option to renew this lease for three (3) additional five (5) year terms
(the "Renewal Terms"; and collectively with the Initial Term, the "Term").
Notice of the exercise of each such renewal shall be given not less than one
hundred eighty (180) days nor more than two hundred seventy (270) days prior to
the expiration of the then existing Initial Term or Renewal Term, as the case
may be. Notwithstanding the foregoing, in no event shall the Term extend beyond
that date which is three (3) years prior to the expiration of the term
(including all renewals) of any Ground Lease, with respect to that portion of
the Land encumbered by any such Ground Lease.
-2-
<PAGE>
1.3 Initial Transaction. By the execution of this Lease,
Lessor is hereby assigning to Lessee, and Lessee is hereby assuming, all
existing equipment leases, service contracts, occupancy agreements and other
agreements to which the Leased Property is subject on the date hereof.
ARTICLE II
2.1 Definitions. For all purposes of this Lease, except as
otherwise expressly provided or unless the context otherwise requires, (a) the
terms defined in this Article have the meanings assigned to them in this Article
and include the plural as well as the singular, (b) all accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
GAAP, (c) all references in this Lease to designated "Articles," "Sections" and
other subdivisions are to the designated Articles, Sections and other
subdivisions of this Lease and (d) the words "herein," "hereof" and "hereunder"
and other words of similar import refer to this Lease as a whole and not to any
particular Article, Section or other subdivision.
Additional Charges: As defined in Section 3.3.
Affiliate: As used in this Lease the term "Affiliate" of a
Person shall mean any Person that, directly or indirectly, controls or is
controlled by or is under common control with such Person. For the purposes of
this definition, "control" (including the correlative meanings of the terms
"controlled by" and "under common control with"), as used with respect to any
person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such person,
through the ownership of voting securities, partnership interests or other
equity interests, by contract or otherwise.
Annual Budget: As used in this Lease, the term "Annual Budget"
shall mean the Operating Budget and a Capital Budget prepared by Lessee and
approved by Lessor in accordance with Section 3.5.
Auditor: Any nationally recognized firm of certified public
accountants with experience in the hospitality industry, selected by Lessee and
approved by Lessor.
Award: As defined in Section 15.1(c).
Base Rate: The prime rate (or base rate) reported in the Money
Rates column or comparable section of The Wall Street Journal as the rate then
in effect for corporate loans at large U.S. money center commercial banks,
whether or not such rate has actually been charged by any such bank. If no such
rate is reported in The Wall Street Journal or if such rate is discontinued,
then Base Rate shall mean such other successor or comparable rate as Lessor may
reasonably designate.
Base Rent: As defined in Section 3.1(a).
-3-
<PAGE>
Beverage Sales: Shall mean gross revenues from (i) the sale of
wine, beer, liquor or other alcoholic beverages, whether sold in a bar or
lounge, delivered to or available in a guest room, sold at meetings or banquets
or at any other location at the Leased Property and (ii) nonalcoholic beverages
sold in a bar or lounge. Such revenue shall include sales by Lessee and its
permitted subtenants, licensees and concessionaires, but as to subleases,
licenses or similar arrangements for alcoholic beverage sales which are entered
into by Lessor or any prior owner of the Leased Property with parties who are
not Affiliates of Lessee and which were existing as of the date of this Lease,
such revenue shall only include rents received under such existing subleases,
licenses or similar arrangements. Such revenue shall be determined in a manner
consistent with the Uniform System and shall not include the following:
(a) Any gratuity or service charge added to a customer's bill
or statement in lieu of a gratuity which is paid directly to an employee to the
extent actually paid to employees;
(b) Credits, rebates or refunds; and
(c) Sales taxes or taxes of any other kind imposed on the sale
of alcoholic or other beverages.
Business Day: Each Monday, Tuesday, Wednesday, Thursday and
Friday that is not a day on which national banks in New York City or in the
municipality wherein the Leased Property is located are closed.
Capital Budget: As defined in Section 3.5.
Capital Expenditures: Amounts advanced to pay the costs of
Capital Improvements.
Capital Expenditures Reserve: As defined in Article XXXVIII.
Capital Impositions: Taxes, assessments or similar charges
imposed upon or levied against the Leased Property for the costs of public
improvements, including, without limitation, roads, sidewalks, public lighting
fixtures, utility lines, storm sewers, drainage facilities, and similar
improvements.
Capital Improvements: Improvements to the Leased Property and
replacement or refurbishing of Fixtures and of Furniture and Equipment that
constitute portions of the Leased Property in connection with its Primary
Intended Use, all as designated as capital improvements by and determined in
accordance with GAAP.
CERCLA: The Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
-4-
<PAGE>
Change in Control: A change in ownership or control of a
Person effected through either of the following:
(i) any Person or related group of Persons (other
than such Person or an Affiliate of such Person) directly or indirectly acquires
beneficial ownership (within the meaning of Rule 3d-3 under the Securities
Exchange Act of 1934, as amended) of securities possessing more than fifty
percent (50%) of the total combined voting power of such Person's outstanding
securities; or
(ii) there is a change in the composition of such
Person's Board of Directors (or the Board of Directors of such Person's general
partner or managing member) over a period of thirty-six (36) consecutive months
(or less) such that a majority of Board members (rounded up to the nearest whole
number) ceases, by reason of one or more proxy contests for the election of
Board members, to be comprised of individuals who either (A) have been Board
members continuously since the beginning of such period or (B) have been elected
or nominated for election as Board members during such period by at least a
majority of the Board members described in clause (A) who were still in office
at the time such election or nomination was approved by the Board.
Change in Operations: As defined in Section 3.7.
COBRA: The Consolidated Omnibus Budget Reconciliation Act of
1985, as amended.
Code: The Internal Revenue Code of 1986, as amended.
Commencement Date: The date of this Lease.
Company: MeriStar Hospitality Corporation.
Condemnation, Condemnor: As defined in Section 15.1.
Consolidated Financials: For any fiscal year or other
accounting period for MHRI and its consolidated Affiliates, statements of
operations, partners' capital and cash flow (or, in the case of a corporation,
statements of operations, retained earnings and cash flow) for such period and
for the period from the beginning of the respective fiscal year to the end of
such period and the related balance sheet as at the end of such period, together
with the notes to any such yearly statement, all in such detail as may be
required by the SEC with respect to filings made by the Company or Lessor, and
setting forth in comparative form the corresponding figures for the
corresponding period in the preceding fiscal year, and prepared in accordance
with GAAP and such statements shall, at MHRI's sole cost and expense, be audited
annually (and quarterly if required by the SEC) by the Auditor. Consolidated
Financials shall be prepared on the basis of a December 31 fiscal year.
-5-
<PAGE>
Consumer Price Index: The "Consumer Price Index" published by
the Bureau of Labor Statistics of the United States Department of Labor, U.S.
City Average, All Items for Urban Wage Earners and Clerical Workers (1982-1984 =
100).
Date of Taking: As defined in Section 15.1(b).
Emergency Expenditures: Expenditures required to take
necessary or appropriate actions to respond to Emergency Situations.
Emergency Situations: Fire, any other casualty, or any other
events, circumstances or conditions which threaten the safety or physical
well-being of the Facility's guests or employees or which involve the risk of
material property damage or material loss to the Facility.
Environmental Authority: Any department, agency or other body
or component of any Government that exercises any form of jurisdiction or
authority under any Environmental Law.
Environmental Authorization: Any license, permit, order,
approval, consent, notice, registration, filing or other form of permission or
authorization required under any Environmental Law.
Environmental Laws: All applicable federal, state, local and
foreign laws and regulations relating to pollution of the environment (including
without limitation, ambient air, surface water, ground water, land surface or
subsurface strata), including without limitation laws and regulations relating
to emissions, discharges, Releases or threatened Releases of Hazardous Materials
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials.
Environmental Laws include but are not limited to CERCLA, FIFRA, RCRA, SARA and
TSCA.
Environmental Liabilities: Any and all actual or potential
obligations to pay the amount of any judgment or settlement, the cost of
complying with any settlement, judgment or order for injunctive or other
equitable relief, the cost of compliance or corrective action in response to any
notice, demand or request from an Environmental Authority, the amount of any
civil penalty or criminal fine, and any court costs and reasonable amounts for
attorney's fees, fees for witnesses and experts, and costs of investigation and
preparation for defense of any claim or any Proceeding, regardless of whether
such Proceeding is threatened, pending or completed, that may be or have been
asserted against or imposed upon Lessor, Lessee, any Predecessor, the Leased
Property or any property used therein and arising out of:
(a) Failure to comply at any time with all Environmental Laws
applicable to the Leased Property;
-6-
<PAGE>
(b) Presence of any Hazardous Materials on, in, under, at or
in any way affecting the Leased Property;
(c) A Release or threatened Release of any Hazardous Materials
on, in, at, under or in any way affecting the Leased Property;
(d) Identification of Lessee, Lessor or any Predecessor as a
potentially responsible party under CERCLA or under any other Environmental Law;
(e) Presence at any time of any above-ground and/or
underground storage tanks, as defined in RCRA or in any applicable Environmental
Law on, in, at or under the Leased Property or any adjacent site or facility; or
(f) Any and all claims for injury or damage to persons or
property arising out of exposure to Hazardous Materials originating or located
at the Leased Property, or resulting from operation thereof including, without
limitation, claims resulting from such Hazardous Materials migrating to an
adjoining property.
Event of Default: As defined in Section 16.1.
Facility: The hotel and/or other facility offering lodging and
other services or amenities being operated or proposed to be operated on the
Leased Property.
FF&E Note: Any promissory note(s) made by Lessee to Lessor
and/or its Affiliates, substantially in the form of Exhibit "D" attached hereto,
evidencing the consideration for acquiring certain personal property at the
Leased Property and/or the Other Properties.
Fair Market Rental Value: The Fair Market Rental Value of the
Leased Property for any five year Renewal Term means an amount of Base Rent and
Participating Rent that a willing tenant would pay to a willing landlord (who is
a real estate investment trust) for the Leased Property over such five year
period, assuming that (a) the Base Rent and Participating Rent are paid and
adjusted in the manner set forth in Section 3.1 of this Lease and (b) the lease
pursuant to which the Leased Property is leased is identical to this Lease
except for (i) the Base Rent and Participating Rent (including the Break Points
set forth on Exhibit "C") and (ii) the Term (which shall be limited to the
Renewal Term in question).
Fair Market Value: The Fair Market Value of the Leased
Property (or any portion thereof) means an amount equal to the price that a
willing buyer not compelled to buy would pay a willing seller not compelled to
sell for such Leased Property, (a) assuming the same is unencumbered by this
Lease, (b) determined in accordance with the appraisal procedures set forth in
Article XXXI or in such other manner as shall be mutually acceptable to Lessor
and Lessee, (c) assuming that such seller must pay customary closing costs and
title premiums, and (d) taking into account the positive or negative effect on
the value of the Leased Property attributable to the interest rate, amortization
schedule, maturity date, prepayment penalty and
-7-
<PAGE>
other terms and conditions of any encumbrance that is assumed by the transferee
or subject to which the Leased Property is transferred. In addition, in
determining the Fair Market Value with respect to damaged or destroyed Leased
Property such value shall be determined as if such Leased Property had not been
so damaged or destroyed.
FIFRA: The Federal Insecticide, Fungicide, and Rodenticide
Act, as amended.
Fixtures: As defined in Section 1.1.
Food Sales: Shall mean (i) gross revenues from the sale of
food and non-alcoholic beverages that are sold or delivered on or off the
Facility by Lessee, its permitted subtenants, licensees or concessionaires,
whether for cash or for credit, including in respect of guest rooms, banquet
rooms, meeting rooms and other similar rooms, and (ii) gross revenue from the
rental of banquet, meeting and other similar rooms. Such revenue shall include
sales by Lessee and its permitted subtenants, licensees and concessionaires, but
as to subleases, licenses or similar arrangements for food and non-alcoholic
beverage sales which were entered into by Lessor or any prior owner of the
Leased Property with parties who are not Affiliates of Lessee and which are
existing as of the date of this Lease, such revenue shall only include rents
received under such existing subleases, licenses or similar arrangements. Such
revenue shall be determined in a manner consistent with the Uniform System and
shall not include the following:
(a) Vending machine sales;
(b) Any gratuities or service charges added to a customer's
bill or statement in lieu of a gratuity which is paid directly to an employee to
the extent actually paid to employees;
(c) Non-alcoholic beverages sold from a bar or lounge;
(d) Credits, rebates or refunds;
(e) Sales taxes or taxes of any other kind imposed on the sale
of food or nonalcoholic beverages; and
(f) Amounts representing the value or cost of food or
non-alcoholic beverages furnished on a complimentary basis to on-site employees
of the Hotel.
Franchise Agreement: Any hotel franchise agreement or license
agreement under which the Facility is operated.
Furniture and Equipment: For purposes of this Lease, the terms
"furniture and equipment" shall mean collectively all furniture, furnishings,
wall coverings, fixtures and hotel equipment and systems located at, or used in
connection with, the Facility, together with all replacements therefor and
additions thereto, including, without limitation, (i) all equipment and
-8-
<PAGE>
systems required for the operation of kitchens, bars and restaurants, if any,
laundry and dry cleaning facilities, (ii) office equipment, (iii) dining room
wagons, materials handling equipment, cleaning and engineering equipment, (iv)
telephone and computerized accounting systems, and (v) vehicles.
GAAP: Generally accepted accounting principles as are at the
time applicable and otherwise consistently applied.
Government: The United States of America, any state, district
or territory thereof, any foreign nation, any state, district, department,
territory or other political division thereof, or any political subdivision of
any of the foregoing.
Gross Revenues: All revenues, receipts, and income of any kind
derived directly or indirectly by Lessee from or in connection with the Facility
(including rentals or other payments from tenants, lessees, licensees or
concessionaires but not including their gross receipts) whether on a cash basis
or credit, paid or collected, determined in accordance with GAAP and the Uniform
System, including, but not limited to, Room Revenues, Food Sales, Beverage Sales
and Other Income, excluding, however: (i) funds furnished by Lessor, (ii)
federal, state and municipal excise, sales, occupancy and use taxes collected
directly from patrons and guests or as a part of the sales price of any goods,
services or displays, such as sales, occupancy, use, gross receipts, admissions,
cabaret or similar or equivalent taxes and paid over to federal, state or
municipal governments, (iii) gratuities actually paid to employees, (iv)
proceeds of insurance and condemnation, (v) proceeds from sales other than sales
in the ordinary course of business (vi) all loan proceeds from financing or
refinancings of the Facility or interests therein or components thereof, (vii)
judgments and awards, except any portion thereof arising from normal business
operations of the hotel, (viii) such other items as are excluded from the
definitions of Food Sales, Beverage Sales and Room Revenues, (ix) Real Estate
Tax refunds pertaining to the Leased Premises, and (x) items constituting
"allowances" under the Uniform System.
Ground Lease: Any lease and/or sublease pursuant to which
Lessor has title to all or any portion of the Land.
Hazardous Materials: All chemicals, pollutants, contaminants,
wastes and toxic substances, including without limitation:
(a) Solid or hazardous waste, as defined in RCRA or in any
Environmental Law;
(b) Hazardous substances, as defined in CERCLA or in any
Environmental Law;
(c) Toxic substances, as defined in TSCA or in any
Environmental Law;
-9-
<PAGE>
(d) Insecticides, fungicides, or rodenticides, as defined in
FIFRA or in any Environmental Law;
(e) Gasoline or any other petroleum product or byproduct,
polychlorinated biphenyls, asbestos and urea formaldehyde;
(f) Asbestos or asbestos containing materials;
(g) Urea formaldehyde foam insulation; and
(h) Radon gas.
Holder: Any holder of a Mortgage, any purchaser of the Leased
Property or any portion thereof at a foreclosure sale or any sale in lieu
thereof, or any designee of any of the foregoing.
Impositions: Collectively, all taxes (including, without
limitation, all ad valorem, sales and use, occupancy, single business, gross
receipts, transaction privilege, rent or similar taxes as the same relate to or
are imposed upon Lessee or Lessor or Lessee's business conducted upon the Leased
Property), assessments (including, without limitation, all assessments for
public improvements or benefit, whether or not commenced or completed prior to
the date hereof and whether or not to be completed within the Term), water,
sewer or other rents and charges, excises, tax inspection, authorization and
similar fees, any fees, charges, dues or assessments required to be paid
pursuant to any condominium, co-operative or homeowners' association
declaration, covenant or like agreement pursuant to which charges or fees may be
assessed against the Leased Property, and all other governmental or private
charges, in each case whether general or special, ordinary or extraordinary, or
foreseen or unforeseen, of every character in respect of the Leased Property or
the business conducted thereon by Lessee (including all interest and penalties
thereon caused by any failure in payment by Lessee), which at any time during or
with respect to the Term hereof may be assessed or imposed on or with respect to
or be a lien upon (a) Lessor's interest in the Leased Property, (b) the Leased
Property, or any part thereof or any rent therefrom or any estate, right, title
or interest therein, or (c) any occupancy, operation, use or possession of, or
sales from, or activity conducted on or in connection with the Leased Property
by Lessee, or the leasing or use of the Leased Property or any part thereof by
Lessee. Nothing contained in this definition of Impositions shall be construed
to require Lessee to pay (1) any tax based on net income (whether denominated as
a franchise or capital stock or other tax) imposed on Lessor or any other
person, or (2) any net revenue tax of Lessor or any other person, or (3) any tax
imposed with respect to the sale, exchange or other disposition by Lessor of any
Leased Property or the proceeds thereof, or (4) any single business, gross
receipts (other than a tax on any rent received by Lessor from Lessee),
transaction, privilege or similar taxes as the same relate to or are imposed
upon Lessor except to the extent that any tax, assessment, tax levy or charge
that Lessee is obligated to pay pursuant to the first sentence of this
definition and that is in effect at any time during the Term hereof is totally
or
-10-
<PAGE>
partially repealed, and a tax, assessment, tax levy or charge set forth in
clause (1) or (2) is levied, assessed or imposed expressly in lieu thereof.
Indemnified Party: Either of a Lessee Indemnified Party or a
Lessor Indemnified Party.
Indemnifying Party: Any party obligated to indemnify an
Indemnified Party pursuant to any provision of this Lease.
Insurance Requirements: All terms of any insurance policy
required by this Lease and all requirements of the issuer of any such policy.
Inventory: All "Inventories of Merchandise" and "Inventories
of Supplies" as defined in the Uniform System, including, but not limited to,
linens, china, silver, glassware and other non-depreciable personal property,
and any property of the type described in Section 1221(1) of the Code.
Land: As defined in Article I.
Lease: This Lease.
Lease Year: Any 12-month period from January 1 to December 31
during the Term, or any shorter period at the beginning or the end of the Term.
Leased Improvements; Leased Property: Each as defined in
Article I.
Legal Requirements: All federal, state, county, municipal and
other governmental statutes, laws, rules, orders, regulations, ordinances,
judgments, decrees and injunctions affecting either the Leased Property or the
maintenance, construction, use, operation or alteration thereof (whether by
Lessee or otherwise), whether or not hereafter enacted and in force, including
(a) all laws, rules or regulations pertaining to the environment, occupational
health and safety and public health, safety or welfare, and (b) any laws, rules
or regulations that may (1) require repairs, modifications or alterations in or
to the Leased Property or (2) in any way adversely affect the use and enjoyment
thereof, and (c) all permits, licenses and authorizations necessary or
appropriate to operate the Leased Property for its Primary Intended Use,
including, but not limited to, any licenses required for the sale and service of
alcoholic beverages, and (d) all covenants, agreements, restrictions and
encumbrances contained in any instruments, either of record or known to Lessee
(other than encumbrances hereafter created by Lessor without the consent of
Lessee), at any time in force affecting the Leased Property.
Lessee: The Lessee designated on this Lease and its respective
permitted successors and assigns.
-11-
<PAGE>
Lessee Indemnified Party: Lessee, any Affiliate of Lessee, any
other Person against whom any claim for indemnification may be asserted
hereunder as a result of a direct or indirect ownership interest in Lessee, the
officers, directors, stockholders, members, partners, employees, agents and
representatives of Lessee and any corporate stockholder, agent or representative
of Lessee, and the respective heirs, personal representatives, successors and
assigns of any such officer, director, stockholder, members, partners, employee,
agent or representative.
Lessee's Personal Property: As defined in Section 6.2.
Lessor: The Lessor designated on this Lease and its respective
successors and assigns.
Lessor Indemnified Party: Lessor, any Affiliate of Lessor,
including the Company, any other Person against whom any claim for
indemnification may be asserted hereunder as a result of a direct or indirect
ownership interest in Lessor, the officers, directors, stockholders, partners,
members, employees, agents and representatives of any of the foregoing Persons
and of any stockholder, partner, member, agent, or representative of any of the
foregoing Persons, the respective heirs, personal representatives, successors
and assigns of any such officers, directors, partners, stockholders, members,
employees, agents or representatives, the Holder of any Mortgage and the lessor
under any Ground Lease.
Lessor's Audit: An audit by Lessor's independent certified
public accountants of the operation of the Leased Property during any Lease
Year, which audit shall be at Lessor's sole cost and expense and may, at
Lessor's election, be either a complete audit of the Leased Property's
operations or an audit of Room Revenues, Food Sales, Beverage Sales and Other
Income realized from the operation of the Leased Property during such Lease
Year.
Major Renovation: Any alteration or renovation or series of
alterations or renovations of the Facility over a 12 consecutive month period,
the total cost of which is or will be equal to or greater than eight percent
(8%) of the Gross Revenues derived from the Facility for the most recent
12-month period prior thereto.
Management Agreement: An agreement between the Lessee and the
Manager relating to the management of the Leased Property, a copy of which has
been delivered to Lessor.
Manager: Any Affiliate of the Lessee approved by Lessor.
Marginal Rate: The maximum marginal effective tax rate
(federal and state) for an individual residing in the State of California.
MHRI: MeriStar Hotels & Resorts, Inc.
-12-
<PAGE>
Mortgage: As defined in Section 28.2.
Net Worth: The excess of total assets over total liabilities,
total assets and total liabilities each to be determined in accordance with
GAAP.
Notice: A notice given pursuant to Article XXX.
Officer's Certificate: A certificate of Lessee reasonably
acceptable to Lessor, signed by the chief financial officer or another officer
duly authorized so to sign by Lessee or a general partner of Lessee, or any
other person whose power and authority to act has been authorized by delegation
in writing by any such officer.
Operating Budget: As defined in Section 3.5.
Other Income: All revenues, receipts, and income of any kind
derived directly or indirectly from or in connection with the Facility and
included in Gross Revenues other than Room Revenues, Food Sales or Beverage
Sales.
Overdue Rate: On any date, a rate equal to the Base Rate plus
5% per annum, but in no event greater than the maximum nonusurious rate then
permitted under applicable law.
Other Leases: The leases of the Other Properties between
Lessor or other Persons controlled by MeriStar Investment Partners, L.P., as
lessor, and Lessee or its Subsidiaries, as lessee.
Other Properties: The properties listed on Exhibit "A"
attached hereto and any future properties acquired by Lessor and/or its
Subsidiaries which are leased to Lessee and/or its Subsidiaries.
Payment Date: Any due date for the payment of any installment
of Rent.
Participating Rent: As defined in Sections 3.1(b), 3.1(c) and
3.1(d).
Person: The term "Person" means and includes individuals,
corporations, general and limited partnerships, limited liability companies,
stock companies or associations, joint ventures, associations, companies,
trusts, banks, trust companies, land trusts, business trusts, or other legal
entities and governments and agencies and political subdivisions thereof.
Personal Property Taxes: All personal property taxes imposed
on the furniture, furnishings or other items of personal property located on,
and used in connection with, the operation of the Leased Improvements as a hotel
(other than Inventory and other personal property owned by the Lessee), together
with all replacements, modifications, alterations and additions thereto.
-13-
<PAGE>
Predecessor: Any Person whose liabilities arising under any
Environmental Law have or may have been retained or assumed by Lessor or Lessee
pursuant to the provisions of this Lease.
Primary Intended Use: As defined in Section 7.2(b).
Proceeding: Any judicial action, suit or proceeding (whether
civil or criminal), any administrative proceeding (whether formal or informal)
any investigation by a governmental authority or entity (including a grand
jury), and any arbitration, mediation or other non-judicial process for dispute
resolution.
RCRA: The Resource Conservation and Recovery Act, as amended.
Real Estate Taxes: All real estate taxes, including general
and special assessments, if any, which are imposed upon the Land and any
improvements thereon.
Release: A "Release" as defined in CERCLA or in any
Environmental Law, unless such Release has been properly authorized and
permitted in writing by all applicable Environmental Authorities or is allowed
by such Environmental Law without authorizations or permits.
Rent: Collectively, the Base Rent, Participating Rent, and
Additional Charges.
Room Revenues: Gross revenue from the rental of guest rooms,
whether to individuals, groups or transients, at the Facility, determined in a
manner consistent with the Uniform System and excluding the following:
(a) The amount of all credits, rebates or refunds to
customers, guests or patrons;
(b) All sales taxes or any other taxes imposed on the rental
of such guest rooms; and
(c) Any fees collected for amenities including, but not
limited to, telephone, laundry, movies or concessions.
SARA: The Superfund Amendments and Reauthorization Act of
1986, as amended.
SEC: The U.S. Securities and Exchange Commission or any
successor agency.
State: The State or Commonwealth of the United States in which
the Leased Property is located.
-14-
<PAGE>
Subsidiaries: Corporations or other entities in which Lessee
or Lessor, as applicable, owns, directly or indirectly, more than 50% of the
voting rights or control, as applicable (individually, a "Subsidiary").
Supervisory Fee: As defined in Section 38.1(d).
Taking: A permanent or temporary taking or voluntary
conveyance during the Term hereof of all or part of the Leased Property, or any
interest therein or right accruing thereto or use thereof, as the result of, or
in settlement of, any Condemnation or other eminent domain proceeding affecting
the Leased Property.
Tax Law Change: A change in the Code (including, without
limitation, a change in the Treasury regulations promulgated thereunder) or in
the judicial or administrative interpretations of the Code, which in Lessor's
determination will permit Lessor or an Affiliate thereof to operate the Facility
as a hotel without adversely affecting the Company's qualification for taxation
as a real estate investment trust under the applicable provisions of the Code.
Term: As defined in Section 1.2.
Termination Payment: As defined in Section 36.1.
Total Leases: This Lease and the Other Leases, collectively.
"Total Lease" means one of the Total Leases.
TSCA: The Toxic Substances Control Act, as amended.
Unavoidable Delay: Delay due to strikes, lock-outs, labor
unrest, inability to procure materials, power failure, acts of God, governmental
restrictions, enemy action, civil commotion, fire, unavoidable casualty,
condemnation or other similar causes beyond the reasonable control of the party
responsible for performing an obligation hereunder, provided that lack of funds
shall not be deemed a cause beyond the reasonable control of either party hereto
unless such lack of funds is caused by the breach of the other party's
obligation to perform any obligations of such other party under this Lease.
Unavoidable Occurrence: The occurrence of strikes, lock-outs,
labor unrest, inability to procure materials, power failure, acts of God,
governmental restrictions, enemy action, civil commotion, fire, unavoidable
casualty, condemnation or other similar causes beyond the reasonable control of
Lessee, provided that any such occurrence is an extraordinary (as opposed to a
routine or cyclical) material event that was not reasonably foreseeable when the
then applicable Annual Budget was prepared.
Uneconomic for its Primary Intended Use: A state or condition
of the Facility such that in the reasonable, good faith judgment of Lessor the
Facility cannot be operated on a
-15-
<PAGE>
commercially practicable basis for its Primary Intended Use, such that Lessor
intends to, and shall, complete the cessation of operations from the Leased
Facility.
Uniform System: Shall mean the Uniform System of Accounts for
Hotels (9th Revised Edition, 1997) as published by the Hotel Association of New
York City, Inc., as same may hereafter be revised.
Unsuitable for its Primary Intended Use: A state or condition
of the Facility such that in the reasonable, good faith judgment of Lessor the
Facility cannot function as an integrated hotel facility consistent with
standards applicable to a well maintained and operated hotel comparable in
quality and function to that of the Facility prior to the damage or loss.
WARN: Work Adjustment and Retraining Notification Act, as
amended.
ARTICLE III
3.1 Rent. Lessee will pay to Lessor by wire transfer of
immediately available funds or such other transfer as Lessor may require, to the
account of Lessor or to the account of such other Person, as Lessor from time to
time may designate in a Notice, without set-off or deduction at any time, all
Base Rent, Participating Rent and Additional Charges, during the Term, as
follows:
(a) Base Rent: The fixed annual sum set forth on Exhibit "C"
(subject to adjustment and increase as set forth in this Section 3.1(a) and in
Section 3.1(d) hereof, the "Base Rent"), payable in arrears in consecutive
monthly installments equal to one-twelfth (1/12th) of the annual sum set forth
on Exhibit "C", the first of which shall be payable on the last day of the month
in which the Commencement Date occurs and continuing thereafter each subsequent
calendar month of the Initial Term, each such monthly payment to be paid on the
last day of each such calendar month; provided, however, that (i) Base Rent
shall be prorated as to any partial Lease Year, (ii) the first and last monthly
payments of Base Rent shall be prorated as to any partial month in the manner
described below, (iii) if the Lease ends on other than the last day of a month,
the Base Rent for such partial month shall be paid on the day the Lease expires,
and (iv) payments of Base Rent shall be subject to abatement where and only
where and to the extent expressly provided in this Lease. If the term of this
Lease commences or ends other than on the first or last day of a month, the Base
Rent due for such month shall equal the monthly Base Rent (computed as provided
in the preceding sentence) multiplied by a fraction having as its numerator the
number of days in said partial month and having as its denominator the number of
days in the entire month.
(b) Participating Rent: For each calendar month during the
Term, Lessee shall pay percentage rent ("Participating Rent") in arrears in an
amount calculated by the following formula (the "Revenues Computation"):
-16-
<PAGE>
For any month, Participating Rent shall equal:
The amount equal to the Monthly Revenues Computation
(defined below)
less
an amount equal to the Base Rent paid for the Lease
Year to date
less
an amount equal to the Participating Rent paid for
the Lease Year to date.
The Participating Rent due for each calendar month during the Term shall be paid
on or before the twenty-first (21st) day of the succeeding month. In no event
shall Participating Rent be less than zero.
For purposes of defining the Monthly Revenues Computation:
(i) "Cumulative Monthly Portion" shall mean a
fraction having as its numerator the aggregate Budgeted Receipts for the
calendar months in a Lease Year which have elapsed including the month for which
the calculation is being made and having as its denominator the aggregate
Budgeted Receipts for the Lease Year. "Budgeted Receipts" shall mean the Gross
Revenues projected in the Operating Budget for such Lease Year (or portion
thereof). The Cumulative Monthly Portion for the December 31 Participating Rent
payment (due January 21 of the next Lease Year) will be 100%, assuming that the
Lease Year in question is a full Lease Year. If the term of this Lease commences
or ends on other than the first or last day of a month, then when calculating
the Cumulative Monthly Portion beginning or ending during such calendar month,
the Cumulative Monthly Portion for such partial calendar month shall be the
product of (i) a fraction having as its numerator the Budgeted Receipts for said
month and having as its denominator the Budgeted Receipts for the entire
calendar year, multiplied by (ii) another fraction having as its numerator the
actual Gross Revenues received during said partial month and having as its
denominator the actual Gross Revenues received during the entire month.
(ii) During the Initial Term, "First Tier Room
Revenue Percentage," "Second Tier Room Revenue Percentage," "Third Tier Room
Revenue Percentage," "First Tier Food Sales Percentage," "Second Tier Food Sales
Percentage," and "Other Income Percentage" shall mean the percentages
corresponding to each of such terms as set forth on Exhibit "C".
(iii) During the Initial Term, "Annual Room Revenues
First Break Point" and "Annual Room Revenues Second Break Point" shall mean the
amount of annual Room Revenues corresponding to each of such terms as set forth
on Exhibit "C".
(iv) During the Initial Term, "Annual Food Sales
Break Point" shall mean the amount of annual Food Sales and Beverage Sales
corresponding to such term as set forth on Exhibit "C".
-17-
<PAGE>
The Monthly Revenues Computation shall be the amount obtained
by adding, for the applicable Lease Year, (i) an amount equal to the First Tier
Room Revenue Percentage of all year to date Room Revenues up to (but not
exceeding) the Cumulative Monthly Portion of the Annual Room Revenues First
Break Point, (ii) an amount equal to the Second Tier Room Revenue Percentage of
all year to date Room Revenues in excess of the Cumulative Monthly Portion of
the Annual Room Revenues First Break Point up to (but not exceeding) the
Cumulative Monthly Portion of the Annual Room Revenues Second Break Point, (iii)
an amount equal to the Third Tier Room Revenue Percentage of all year to date
Room Revenues in excess of the Cumulative Monthly Portion of the Annual Room
Revenues Second Break Point, (iv) an amount equal to the First Tier Food Sales
Percentage of the Cumulative Monthly Portion of all year to date Food Sales and
Beverage Sales up to (but not exceeding) the Cumulative Monthly Portion of the
Annual Food Sales Break Point, (v) an amount equal to the Second Tier Food Sales
Percentage of all year to date Food Sales and Beverage Sales in excess of the
Cumulative Monthly Portion of the Annual Food Sales Break Point, and (vi) an
amount equal to the Other Income Percentage of year to date revenues from Other
Income.
It is understood that the inclusion of Beverage Sales in the
Revenues Computation is for the sole purpose of calculating Participating Rent
and that neither Lessor nor Lessee shall be deemed to be actually receiving a
percentage of the Beverage Sales where receipt would be in violation of
applicable law.
Additional provisions regarding Participating Rent are set
forth on Exhibit "C" hereto.
(c) Officer's Certificates. Within twenty-one (21) days after
each of the first three quarters of each Lease Year (or part thereof) in the
Term, Lessee shall deliver to Lessor an Officer's Certificate reasonably
acceptable to Lessor, setting forth the calculation of the Participating Rent
payment for the three (3) months comprising such quarter, based on the formulas
set forth in Section 3.1(b). There shall be no reduction in the Base Rent
regardless of the result of the Revenues Computation.
In addition, on or before forty-five (45) days after the end
of each Lease Year, Lessee shall deliver to Lessor an Officer's Certificate
reasonably acceptable to Lessor setting forth the computation of the actual
Participating Rent that accrued for each month of the Lease Year that ended on
the immediately preceding December 31. Additionally, if the annual Participating
Rent due and payable for any Lease Year (as shown in the applicable Officer's
Certificate) exceeds the amount actually paid as Participating Rent by Lessee
for such year, Lessee also shall pay such excess to Lessor at the time such
certificate is delivered. If the Participating Rent actually due and payable for
such Lease Year is shown by such certificate to be less than the amount actually
paid as Participating Rent for the applicable Lease Year, at the option of
Lessor, Lessor shall reimburse such amount to Lessee or credit such amount
against subsequent months' Base Rent and, to the extent necessary, subsequent
months' Participating Rent payments, or, if none, then such amounts shall be
paid to Lessee. Any such credit to Base
-18-
<PAGE>
Rent shall not be applied for purposes of calculating Participating Rent payable
for any subsequent month.
Any difference between the annual Participating Rent due and
payable for any Lease Year (as shown in the applicable Officer's Certificate or
as adjusted pursuant to Section 3.1(d)) and the total amount actually paid by
Lessee as Participating Rent for such Lease Year, whether in favor of Lessor or
Lessee, shall bear interest at the Base Rate, which interest shall accrue from
the due date of the last monthly Participating Rent payment for the Lease Year
until the amount of such difference shall be paid or otherwise discharged. Any
such interest payable to Lessor shall be deemed to be and shall be payable as
Additional Charges.
The obligation to pay Participating Rent shall survive the
expiration or earlier termination of the Term, and a final reconciliation,
taking into account, among other relevant adjustments, any adjustments which are
accrued after such expiration or termination date but which related to
Participating Rent accrued prior to such termination date, shall be made not
later than ninety (90) days after such expiration or termination date.
(d) CPI Adjustments. For each Lease Year during the Term
beginning with the CPI Adjustment Commencement Year (as defined in Exhibit "C"),
the Base Rent then in effect, the Annual Room Revenues First Break Point and the
Annual Room Revenues Second Break Point (together, the "Annual Room Revenues
Break Points"), and the Annual Food Sales Break Point then included in the
Revenues Computation set forth in Section 3.1(b), shall be increased as follows:
(1) For the CPI Adjustment Commencement Year and for
each Lease Year thereafter during the Term, the Consumer Price Index for the day
before the day that the new Lease Year commences (the "Measurement Date") shall
be divided by the Consumer Price Index for the day that is twelve (12) months
preceding the Measurement Date;
(2) The new Base Rent for the then current Lease Year
shall be the product of the Base Rent in effect in the most recently ended Lease
Year and the quotient obtained under subparagraph (1) above;
(3) The new Annual Room Revenues Break Points in the
Revenues Computation described in Section 3.1(b) above for the CPI Adjustment
Commencement Year and for each Lease Year thereafter during the Term, shall be
the product of (a) the Annual Room Revenues Break Point in effect in the most
recently ended Lease Year and (b) the quotient obtained in subparagraph (1)
above plus seventy-five one hundredths percent (.75%); and
(4) The new Annual Food Sales Break Point in the
Revenues Computation described in Section 3.1(b) above for the CPI Adjustment
Commencement Year and for each Lease Year thereafter during the Term, shall be
the product of (a) the Annual Food
-19-
<PAGE>
Sales Break Point in effect in the most recently ended Lease Year and (b) the
quotient obtained in subparagraph (1) above plus seventy-five one hundredths
percent (.75%).
In no event shall the Base Rent, the Annual Room Revenues
Break Points or the Annual Food Sales Break Point be reduced as a result of any
changes in the Consumer Price Index.
Adjustments calculated as set forth above in the Base Rent,
the Annual Room Revenues Break Points and the Annual Food Sales Break Point
shall be effective on the first day of each calendar Lease Year to which such
adjusted amounts apply. If Rent is paid prior to the determination of the amount
of any adjustment to Base Rent, the Annual Room Revenues Break Points or the
Annual Food Sales Break Point applicable for such period, whether because of a
delay in the publication of the Consumer Price Index for the Measurement Date or
because of any other reason, payment adjustments for any shortfall in or
overpayment of Rent paid shall be made with the first Base Rent and
Participating Rent payments due after the amount of the adjustments are
determined.
If (i) a significant change is made in the number or nature
(or both) of items used in determining the Consumer Price Index, or (ii) the
Consumer Price Index shall be discontinued for any reason, the Bureau of Labor
Statistics shall be requested to furnish a new index comparable to the Consumer
Price Index, together with information which will make possible a conversion to
the new index in computing the adjusted Base Rent, Annual Room Revenues Break
Points, and Annual Food Sales Break Point hereunder. If for any reason the
Bureau of Labor Statistics does not furnish such an index and such information,
the parties will instead mutually select, accept and use such other index or
comparable statistics on the cost of living in various U.S. cities that is
computed and published by an agency of the United States or a responsible
financial periodical of recognized authority.
A portion of the aggregate of Base Rent and Participating Rent
payable for each Lease Year as designated on Exhibit "C" shall be attributed to
the rights to the Franchise Agreement granted by Lessor to Lessee pursuant to
Section 1.1(g).
(e) Calculation of Rent for Renewal Terms. The Rent for each
Renewal Term shall be the then Fair Market Rental Value for the Leased Property.
Promptly after the delivery of Lessee's Notice of its election to renew the Term
of this Lease pursuant to Section 1.2(b) above, representatives of Lessor and
Lessee shall meet to discuss and agree upon the Fair Market Rental Value for the
Renewal Term. Such representatives shall meet, discuss and negotiate diligently
and in good faith to arrive at an agreed-upon Base Rent and Participating Rent
(including Break Points) for the Renewal Term within sixty (60) days after the
giving of such renewal notice. If the parties cannot agree upon the Fair Market
Rental Value for the Renewal Term within such sixty (60) day period, such Fair
Market Rental Value shall be determined by arbitration in accordance with
Article 40.
-20-
<PAGE>
3.2 Confirmation of Participating Rent. Lessee shall utilize,
or cause to be utilized, an accounting system for the Leased Property in
accordance with its usual and customary practices, and in accordance with GAAP
and the Uniform System, that will accurately record all data necessary to
compute Participating Rent, and Lessee shall retain, for at least five (5) years
after the expiration of each Lease Year, reasonably adequate records conforming
to such accounting system showing all data necessary to conduct Lessor's Audit
and to compute Participating Rent for the applicable Lease Years. Lessor shall
have the right from time to time by its accountants or representatives to audit
such information in connection with Lessor's Audit, and to examine all Lessee's
records (including supporting data and sales and excise tax returns) reasonably
required to complete Lessor's Audit and to verify Participating Rent, subject to
any prohibitions or limitations on disclosure of any such data under Legal
Requirements. If any Lessor's Audit discloses a deficiency in the payment of
Participating Rent, and either Lessee agrees with the result of Lessor's Audit
or the matter is otherwise determined or compromised, then promptly after such
agreement or determination Lessee shall pay to Lessor the amount of the
deficiency, together with interest at the Overdue Rate from the date when said
payment should have been made to the date of payment thereof; provided, however,
that as to any Lessor's Audit that is commenced more than one (1) year after the
end of any Lease Year, the deficiency, if any, with respect to such
Participating Rent shall bear interest at the Overdue Rate only from the date
such determination of deficiency is made unless such deficiency is the result of
gross negligence or willful misconduct on the part of Lessee, in which case
interest at the Overdue Rate will accrue from the date such payment should have
been made to the date of payment thereof. If any Lessor's Audit discloses a
deficiency in the payment of Participating Rent which, as finally agreed or
determined exceeds four percent (4%), Lessee shall pay the costs of the portion
of Lessor's Audit allocable to the determination of Gross Revenues (the "Revenue
Audit"). In no event shall Lessor undertake a Lessor's Audit more than three (3)
years after the last day of the Lease Year for which such audit is requested. If
any Lessor's Audit discloses an excess in the payment of Participating Rent,
Lessor, at its option, shall reimburse such amount to Lessee or credit such
amount against subsequent weeks' Base Rent, and, to the extent necessary,
subsequent quarters' Participating Rent payments, or, if none, then such amount
shall be paid to Lessee. Any credit to Base Rent shall not be applied for
purposes of calculating Participating Rent payable for any subsequent quarter.
Any proprietary information obtained by Lessor pursuant to the provisions of
this Section shall be treated as confidential, except that such information may
be used, subject to appropriate confidentiality safeguards, in any arbitration
or litigation between the parties and except further that Lessor may disclose
such information to prospective lenders and investors and to any other persons
to whom disclosure is necessary to comply with applicable laws, regulations and
government requirements. The obligations of Lessee contained in this Section
shall survive the expiration or earlier termination of this Lease. Any dispute
as to the existence or amount of any deficiency in the payment of Participating
Rent as disclosed by Lessor's Audit shall, if not otherwise settled by the
parties, be submitted to arbitration pursuant to the provisions of Section 40.2.
3.3 Additional Charges. In addition to the Base Rent and
Participating Rent, (a) Lessee also will pay and discharge as and when due and
payable all other amounts, liabilities, obligations and Impositions that Lessee
assumes or agrees to pay under this Lease, and (b) in
-21-
<PAGE>
the event of any failure on the part of Lessee to pay any of those items
referred to in clause (a) of this Section 3.3, Lessee also will promptly pay and
discharge every fine, penalty, interest and cost that may be added for
non-payment or late payment of such items (the items referred to in clauses (a)
and (b) of this Section 3.3 being additional rent hereunder and being referred
to herein collectively as the "Additional Charges"), and Lessor shall have all
legal, equitable and contractual rights, powers and remedies provided either in
this Lease or by statute or otherwise in the case of non-payment of the
Additional Charges as in the case of non-payment of the Base Rent or
Participating Rent. If any installment of Base Rent, Participating Rent or
Additional Charges (but only as to those Additional Charges that are payable
directly to Lessor) shall not be paid on its due date, Lessee will pay Lessor
within ten (10) days of demand, as Additional Charges, a late charge (to the
extent not in violation of any usury statutes and otherwise permitted by law)
computed at the Overdue Rate on the amount of such installment, from the due
date of such installment to the date of payment thereof. To the extent that
Lessee pays any Additional Charges to Lessor pursuant to any requirement of this
Lease, Lessee shall be relieved of its obligation to pay such Additional Charges
to the entity to which they would otherwise be due and Lessor shall pay same
from monies received from Lessee.
3.4 No Set Off. Rent shall be paid to Lessor without set off,
deduction or counterclaim, subject to any other provisions of this Lease that
expressly provide for adjustment or abatement of or set offs against Rent or
other charges, and further subject to Lessee's right to assert any claim or
mandatory counterclaim in any action brought by either party under this Lease.
3.5 Annual Budget. Lessee shall prepare and submit to Lessor,
by not later than ninety (90) days prior to the commencement of each Lease Year
a capital budget (the "Capital Budget") and an estimate of Gross Revenues, and
by not later than sixty (60) days prior to the commencement of each Lease Year,
an operating budget (the "Operating Budget"), each of which shall be prepared in
accordance with the requirements of this Section 3.5. The Operating Budget and
the Capital Budget (together, the "Annual Budget") shall be prepared in
accordance with the Uniform System to the extent applicable and show by month
and quarter and for the year as a whole in the degree of detail specified by the
Uniform System for monthly statements, and in accordance with the detail level
of monthly financial statements, the following:
(a) Lessee's reasonable estimate of Gross Revenues (including
room rates and Room Revenues) for the forthcoming Lease Year itemized on
schedules on a monthly and quarterly basis as approved by Lessor and Lessee,
together with the assumptions, in narrative form, forming the basis of such
schedules.
(b) An estimate of any amounts Lessor will be requested to
provide for Capital Improvements during the current and the next Lease Year,
itemized on a monthly and quarterly basis, subject to the limitations set forth
in Article XXXVIII, including a reasonably detailed breakdown of all hard and
soft costs for each Capital Improvement.
(c) A cash flow projection.
-22-
<PAGE>
(d) A narrative description of the program for advertising and
marketing the Facility for the forthcoming Lease Year containing a detailed
budget itemization of the proposed advertising expenditures by category and the
assumptions, in narrative form, forming the basis of such budget itemization.
(e) Lessee's reasonable estimate for each quarter of the Lease
Year of Participating Rent including Room Revenues, Food Sales, Beverage Sales
and Other Income.
Lessor shall have thirty (30) days after the date on which it
receives the Capital Budget to review, approve, disapprove or change the entries
and information appearing in the Capital Budget. If the parties are not able to
reach agreement on the Capital Budget for any Lease Year during Lessor's thirty
(30) day review period, the parties shall attempt in good faith during the
subsequent thirty (30) day period to resolve any disputes, which attempt shall
include, if requested by either party, at least one meeting of executive-level
officers of Lessor and Lessee. The Capital Budget shall be finalized at least
thirty (30) days prior to the commencement of each Lease Year, provided that in
the event the parties are still not able to reach agreement on the Capital
Budget for any particular Lease Year after complying with the foregoing
requirements of this Section 3.5, the parties shall adopt such portions of the
Capital Budget as they may have agreed upon, and any matters not agreed upon
shall be referred to arbitration as provided for in Section 40.2 hereof.
Notwithstanding the foregoing, if Lessor believes that the amount budgeted for
any particular Capital Improvement is in excess of the actual total cost for
which such Capital Improvement could be built or installed, Lessor, in its sole
discretion, may insist that the amount allocated for such Capital Improvement in
the Capital Budget be reduced to the amount for which Lessor believes it can be
built or installed and Lessor shall be responsible for supervising the design,
installation and/or construction of such Capital Improvement, for which it shall
receive a Supervisory Fee in accordance with Section 38.1(d) below. Pending the
results of any arbitration or the earlier agreement of the parties, if the
Capital Budget has not been agreed upon, no Capital Expenditures shall be made
unless the same are set forth in a previously approved Capital Budget, are
specifically required by Lessor or are otherwise required to comply with Legal
Requirements, to make Emergency Expenditures or to comply with the Franchise
Agreement. Lessee shall provide Lessor with copies of any revisions to the
Annual Budget which it may desire or otherwise deem appropriate to make from
time to time during any Lease Year, but no such revision shall require Lessor's
approval or constitute a change in the Annual Budget for the purposes of any
provisions of this Lease. The Capital Budget, once approved and as approved,
shall form the basis on which expenditures for Capital Improvements shall be
made. Subject to the terms and provisions of Article XXXVIII hereof, Lessee will
be obligated to make all Capital Improvements and Lessor will be obligated to
pay all Capital Expenditures which are reflected on a Capital Budget which has
been approved. Unless such expenditures are otherwise permitted in writing by
Lessor or are Emergency Expenditures or are required by the Franchise Agreement,
Lessee agrees not to cause or permit any such expenditures for a Lease Year in
excess of those set forth in the Capital Budget. Lessee shall promptly report to
Lessor in writing any actual or anticipated deviation from the Capital Budget of
any material or long-term consequence. Representatives of Lessee and Lessor
shall meet as requested by Lessor but not less frequently than monthly to review
and
-23-
<PAGE>
discuss the previous and future quarters' operating statements, Gross Revenues,
Capital Expenditures and the general concerns of Lessee and Lessor.
Lessor shall have thirty (30) days after the date on which it
receives the Operating Budget to review the same and notify Lessee of its
approval or disapproval. Any notice of disapproval of the Operating Budget shall
state with particularity the line items appearing therein to which Lessor
disapproves and the amount Lessor is willing to approve for each such line item
in Lessor's reasonable judgement. The Operating Budget shall be finalized by the
commencement of each Lease Year. If the parties are not able to reach agreement
as to an entry for any line item in the Operating Budget for any particular
Lease Year during Lessor's thirty (30) day review period, the parties shall use
the amount applicable to each such line item in the approved Operating Budget of
the immediately preceding year and with respect to all other line items
contained in the Operating Budget for the particular Lease Year in question
which have not been disapproved with particularity by Lessor, the parties shall
use the amounts set forth in such Operating Budget. Lessor and Lessee shall
attempt in good faith during the subsequent sixty (60) day period to resolve any
disputes, which attempt shall include, if requested by either party, at least
one meeting of executive-level officers of Lessor and Lessee, provided that in
the event the parties are still not able to reach agreement on the Operating
Budget for any particular Lease Year after complying with the foregoing
requirements of this Section 3.5, the parties shall submit the matter to
arbitration under Section 40.2 hereof.
3.6 Books and Records. Lessee shall keep full and adequate
books of account and other records reflecting the results of operation of the
Facility on an accrual basis, all in accordance with the Uniform System and GAAP
and the obligations of Lessee under this Lease. The books of account and all
other records relating to or reflecting the operation of the Facility shall be
kept at the Facility, or at Lessee's offices in Washington, D.C., or at Lessee's
regional office in Dallas, Texas, and shall be available to Lessor and its
representatives and its auditors or accountants, at all reasonable times for
examination, audit, inspection, and transcription. All of such books and records
pertaining to the Facility including, without limitation, books of account,
guest records and front office records, at all times shall be the property of
Lessor and shall not be removed from the Facility or Lessee's offices without
Lessor's prior written approval. Lessee shall be entitled to make copies of any
or all such books and records for its own files. Lessee's obligations under this
Section 3.6 shall survive termination of this Lease for any reason.
3.7 Hotel Operations. Lessee covenants to operate the Facility
as a "full service hotel", to the extent it is currently being operated as such.
A "full service hotel" is a hotel that includes a restaurant and meeting
facilities and may have some or all of the following: conference facilities,
banquet space, lounge areas, gift shops, recreational facilities (including
swimming pool), and guest services (including room service, valet service and
laundry). Without Lessor's prior written consent in each instance, Lessee shall
not discontinue, cease to provide or materially cut back on the scope or hours
of operation of any services or amenities which were in operation or which were
being provided at the commencement of the Term of this
-24-
<PAGE>
Lease, nor shall it grant subleases or concessions for the provision of any such
services or amenities which it was providing upon the commencement of the Term
of this Lease.
3.8 Allocation of Revenues. In the event that individuals or
groups purchase rooms, food and beverage and/or the use of other hotel
facilities or services together or as part of a package, Lessee agrees that
revenues shall be allocated among Room Revenues, Food Sales, Beverage Sales
and/or other revenue categories, as applicable, in a reasonable manner
consistent with the historical allocation of such revenues.
ARTICLE IV
4.1 Payment of Impositions. Subject to the right of Lessor to
contest the same, Lessor shall pay all Real Estate Taxes, Personal Property
Taxes, and Capital Impositions before any fine, penalty, interest or cost may be
added for non-payment, to the extent the failure to do so materially and
adversely affects the rights of the Lessee under this Lease, such payments to be
made directly to the taxing or other authorities where feasible. Subject to
Article XII relating to permitted contests, Lessee will pay, or cause to be
paid, all Impositions (other than Capital Impositions, Real Estate Taxes and
Personal Property Taxes) before any fine, penalty, interest or cost may be added
for nonpayment, such payments to be made directly to the taxing or other
authorities where feasible, and will promptly furnish to Lessor copies of
official receipts or other satisfactory proof evidencing such payments. Lessee's
obligation to pay such Impositions shall be deemed absolutely fixed upon the
date such Impositions become a lien upon the Leased Property or any part thereof
subject to Lessee's right to contest pursuant to Article XII. If any such
Imposition may, at the option of the taxpayer, lawfully be paid in installments
(whether or not interest shall accrue on the unpaid balance of such Imposition),
Lessee may exercise the option to pay the same (and any accrued interest on the
unpaid balance of such Imposition) in installments and in such event, shall pay
such installments and any unpaid balance of such Impositions prior to the
expiration or earlier termination of the Term hereof (subject to Lessee's right
of contest pursuant to the provisions of Article XII) as the same respectively
come due and before any fine, penalty, premium, further interest or cost may be
added thereto. Lessor, at its expense, shall, to the extent required or
permitted by applicable law, prepare and file all tax returns in respect of
Lessor's net income, gross receipts, sales and use, single business, transaction
privilege, rent, ad valorem, franchise taxes, Real Estate Taxes, Personal
Property Taxes and taxes on its capital stock, and Lessee, at its expense,
shall, to the extent required or permitted by applicable laws and regulations,
prepare and file all other tax returns and reports in respect of any Imposition
as may be required by governmental authorities. If any refund shall be due from
any taxing authority in respect of any Imposition paid by Lessee, the same shall
be paid over to or retained by Lessee if no Event of Default shall have occurred
hereunder and be continuing. If an Event of Default shall have been declared by
Lessor and be continuing, any such refund shall be paid over to or retained by
Lessor. Any such funds retained by Lessor due to an Event of Default shall be
applied as provided in Article XVI. Lessor and Lessee shall, upon request of the
other, cooperate with the other party and otherwise provide such data as is
maintained by the party to whom the request is made with respect to the Leased
Property as may
-25-
<PAGE>
be necessary to prepare any required returns and reports. Notwithstanding the
foregoing provisions of this Section, Lessee shall file all Personal Property
Tax returns in such jurisdictions where it is legally required to so file.
Lessor, to the extent it possesses the same, and Lessee, to the extent it
possesses the same, will provide the other party, upon request, with cost and
depreciation records necessary for filing returns for any property classified as
personal property. Where Lessor is legally required to file Personal Property
Tax returns, Lessee shall provide Lessor with copies of assessment notices in
sufficient time for Lessor to file a protest. Lessor, may, upon notice to
Lessee, at Lessor's option and at Lessor's sole expense, protest, appeal, or
institute such other proceedings (in its or Lessee's name) as Lessor may deem
appropriate to effect a reduction of real estate or personal property
assessments for those Impositions to be paid by Lessor, and Lessee, at Lessor's
expense as aforesaid, shall fully cooperate with Lessor in such protest, appeal,
or other action. Lessor hereby agrees to indemnify, defend, and hold harmless
Lessee from and against any claims, obligations, and liabilities against or
incurred by Lessee in connection with such cooperation. Lessee may, upon notice
to Lessor, at Lessor's option and at Lessee's sole expense, protest, appeal or
institute such other proceedings (in its or Lessor's name) as Lessee may deem
appropriate to effect a reduction of Impositions to be paid by Lessee, and
Lessor, at Lessee's expense, shall fully cooperate with Lessee in such protest,
appeal or other action. Lessee hereby agrees to indemnify, defend and hold
harmless Lessor from and against any claims, obligations and liabilities against
or incurred by Lessor in connection with such cooperation. Billings for
reimbursement of Personal Property Taxes by Lessee to Lessor shall be
accompanied by copies of a bill therefor and payments thereof which identify the
personal property with respect to which such payments are made. Lessor, however,
reserves the right to effect any such protest, appeal or other action and, upon
notice to Lessee, shall control any such activity, which shall then go forward
at Lessor's sole expense. Upon such notice, Lessee, at Lessor's expense, shall
cooperate fully with such activities. To the extent received by it, Lessee shall
furnish Lessor with copies of all assessment notices for Real Estate Taxes and
Personal Property Taxes in sufficient time for Lessor to file a protest and pay
such taxes without penalty. Lessor shall within thirty (30) days after making
such payment furnish Lessee with evidence of payment of Capital Impositions,
Real Estate Taxes and Personal Property Taxes.
4.2 Notice and Accrual of Impositions. Lessor shall give
prompt Notice to Lessee of all Impositions payable by Lessee hereunder of which
Lessor at any time has knowledge, provided that Lessor's failure to give any
such Notice shall in no way diminish Lessee's obligations hereunder to pay such
Impositions, but if Lessee did not otherwise have knowledge of such Imposition
sufficient to permit it to pay same, such failure shall obviate any default
hereunder for a reasonable time after Lessee receives Notice of any Imposition
which it is obligated to pay during the first taxing period applicable thereto,
and Lessor will reimburse Lessee for any fine, penalty or interest arising from
such delay. If requested by Lessor or required by the Holder of a Mortgage,
Lessee shall accrue and set aside on a monthly basis a portion (as Lessor or
such Holder shall designate) of Rent for the payment of those Impositions that
are payable by Lessor, and such accruals shall be deposited with such Holder, if
so required by it, or as otherwise approved by Lessor.
-26-
<PAGE>
4.3 Adjustment of Impositions. Impositions payable by Lessee
which are imposed in respect of the tax-fiscal period during which the Term
terminates shall be adjusted and prorated between Lessor and Lessee, whether or
not such Imposition is imposed before or after such termination, and Lessee's
obligation to pay its prorated share thereof after termination shall survive
such termination.
4.4 Utility Charges. Lessee will be solely responsible for
obtaining and maintaining utility services to the Leased Property and will pay
or cause to be paid all charges for electricity, gas, oil, water, sewer and
other utilities used in the Leased Property during the Term.
4.5 Franchise Fees. Except as otherwise expressly provided in
Section 37.1 hereof, Lessee will pay or cause to be paid all fees and other
charges payable pursuant to the Franchise Agreement with respect to the
Facility.
4.6 Ground Rent. In the event that Lessor's interest in all or
any portion of the Land is pursuant to a Ground Lease, Lessor shall be solely
responsible for payment of any rent due with respect to the Leased Property
under such Ground Lease.
ARTICLE V
5.1 No Termination, Abatement, etc. Except as otherwise
specifically provided in this Lease, Lessee, to the extent permitted by law,
shall remain bound by this Lease in accordance with its terms and shall neither
take any action without the written consent of Lessor to modify, surrender or
terminate the same, nor seek nor be entitled to any abatement, deduction,
deferment or reduction of the Rent, or setoff against the Rent, nor shall the
obligations of Lessee be otherwise affected by reason of (a) any damage to, or
destruction of, any Leased Property or any portion thereof from whatever cause
or any Taking of the Leased Property or any portion thereof, (b) any bankruptcy,
insolvency, reorganization, composition, readjustment, liquidation, dissolution,
winding up or other proceedings affecting Lessor or any assignee or transferee
of Lessor, or (c) for any other cause whether similar or dissimilar to any of
the foregoing other than a discharge of Lessee from any such obligations as a
matter of law. Lessee hereby specifically waives all rights, arising from any
default under this Lease by Lessor which may now or hereafter be conferred upon
it by law to (1) modify, surrender or terminate this Lease or quit or surrender
the Leased Property or any portion thereof, or (2) entitle Lessee to any
abatement, reduction, suspension or deferment of or set off against the Rent or
other sums payable by Lessee hereunder, except to the extent that Lessor's
action constitutes constructive eviction and except as otherwise specifically
provided in this Lease. The obligations of Lessee hereunder shall be separate
and independent covenants and agreements and the Rent and all other sums payable
by Lessee hereunder shall continue to be payable in all events unless the
obligations to pay the same shall be terminated, abated or modified pursuant to
the express provisions of this Lease or by termination of this Lease other than
by reason of an Event of Default.
-27-
<PAGE>
ARTICLE VI
6.1 Ownership of the Leased Property. Lessee acknowledges that
the Leased Property is the property of Lessor and that Lessee has only the right
to the possession and use of the Leased Property upon the terms and conditions
of this Lease.
6.2 Lessee's Personal Property.
(a) Upon commencement of the Term, Lessor shall make available
to Lessee, for Lessee's use in connection with the operation and management of
the Facility, all Inventory located at the Facility on the Commencement Date
(the "Initial Inventory"). Except for the food and beverage inventory for which
Lessor shall be reimbursed the cost thereof, the Initial Inventory shall be made
available at no charge to Lessee. The parties acknowledge and agree that as of
the date of this Lease the amount of Initial Inventory at the Facility is
consistent with the amount of Inventory customarily maintained in a hotel of the
type and character of the Facility and as otherwise is required to operate the
Leased Property in the manner contemplated by this Lease and in compliance with
the Franchise Agreement and all Legal Requirements. Throughout the Term, Lessee
shall maintain a full stock of Inventory at the Facility at the levels
substantially similar to or greater than those existing on the date hereof. As
the Initial Inventory is depleted, Lessee shall purchase, at its sole cost and
expense, any replacement Inventory which may be required. The Inventory,
including any additions and/or replacements thereof, shall be and remain the
property of Lessee during the Term of this Lease. Lessee may (and shall as
provided hereinbelow), at its expense, install, affix or assemble or place on
any parcels of the Land or in any of the Leased Improvements, any items of
personal property (including Inventory, Furniture and Equipment) owned by Lessee
(collectively, the "Lessee's Personal Property"). All of Lessee's Personal
Property, other than Inventory, not removed by Lessee within thirty (30) days
following the expiration or earlier termination of the Term shall be considered
abandoned by Lessee and may be appropriated, sold, destroyed or otherwise
disposed of by Lessor without first giving Notice thereof to Lessee without any
payment to Lessee and without any obligation to account therefor. Lessee will,
at its expense, restore the Leased Property to the condition required by Section
9.1(d), including repair of all damage to the Leased Property caused by the
removal of Lessee's Personal Property, whether effected by Lessee or Lessor.
(b) Upon the expiration or earlier termination of the Term for
any reason, Lessee shall surrender the Inventory to Lessor in the amounts and at
the levels existing on the date of this Lease. Except for the food and beverage
inventory for which Lessee shall be reimbursed the cost thereof, the Inventory
shall be surrendered at no charge to Lessor. In the event that the amount of
Inventory at the time of such expiration or termination is less than that
provided by Lessor on the date hereof (an "Inventory Deficiency"), Lessee shall
promptly pay to Lessor the amount equal to the Fair Market Value of the
Inventory Deficiency.
(c) If, during the Term, as a result of additions,
modifications or improvements to the Leased Property, the ratio (expressed as a
percentage) of (x) the adjusted
-28-
<PAGE>
basis for Federal income tax purposes of that portion of the Leased Property
consisting of personal property, to (y) the adjusted basis for such purposes of
the Leased Property, shall exceed fifteen percent (15%), Lessor, at its option,
may sell to Lessee (and Lessee shall purchase from Lessor) a sufficient quantity
of such personal property as shall be necessary so that the aforesaid percentage
does not exceed fifteen percent (15%). The aforesaid sale shall be at Fair
Market Value for the items sold and shall otherwise be in accordance with the
provisions of Section 18.1 below (including a contemporaneous equitable
reduction of the Rent payable under Section 3.1).
ARTICLE VII
7.1 Condition of the Leased Property. Lessee acknowledges
receipt and delivery of possession of the Leased Property. Lessee has examined
and otherwise has knowledge of the condition of the Leased Property and has
found the same to be satisfactory for its purposes hereunder. Lessee is leasing
the Leased Property "as is", "with all faults", and in its present condition.
Except as otherwise specifically provided herein, Lessee waives any claim or
action against Lessor in respect of the condition of the Leased Property. LESSOR
MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF THE
LEASED PROPERTY, OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN
OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, AS TO QUALITY OF
THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING AGREED THAT ALL
SUCH RISKS ARE TO BE BORNE BY LESSEE. LESSEE ACKNOWLEDGES THAT THE LEASED
PROPERTY HAS BEEN INSPECTED BY LESSEE AND IS SATISFACTORY TO IT. Lessor shall
have the right to proceed against any predecessor in title for breaches of
warranties or representations or for latent defects in the Leased Property, and
Lessor shall, if requested by Lessee, assign any such right to Lessee if and to
the extent Lessor determines not to exercise such right. If either party
determines to exercise such right, the other party shall fully cooperate in the
prosecution of any such claim, in Lessor's or Lessee's name, all at the cost and
expense of the prosecuting party, who hereby agrees to indemnify, defend and
hold harmless the other party from and against any claims, obligations and
liabilities against or incurred by such other party in connection with such
cooperation, and who further agrees to apply all amounts realized from the
prosecution of such claim, less its expenses in connection therewith, to remedy
such breach or cure such defect.
7.2 Use of the Leased Property.
(a) Lessee covenants that it will proceed with all due
diligence and will exercise its best efforts to obtain and to maintain all
approvals needed to use and operate the Leased Property and the Facility under
applicable local, state and federal law.
(b) Lessee shall use or cause to be used the Leased Property
only as a hotel facility, and for such other uses as may be necessary or
incidental to such use, or such other use as otherwise approved by Lessor (the
"Primary Intended Use"). Lessee shall not use the Leased
-29-
<PAGE>
Property or any portion thereof for any other use without the prior written
consent of Lessor. No use shall be made or permitted to be made of the Leased
Property, and no acts shall be done, which will cause the cancellation of any
insurance policy covering the Leased Property or any part thereof (unless
another adequate policy satisfactory to Lessor is available and Lessee pays any
premium increase), nor shall Lessee sell or permit to be kept, used or sold in
or about the Leased Property any article which is prohibited by law or fire
underwriter's regulations. Lessee shall comply with all of the requirements
pertaining to the Leased Property of any insurance board, association,
organization or company necessary for the maintenance of insurance, as herein
provided, covering the Leased Property and Lessee's Personal Property, which
compliance shall be performed at Lessee's sole cost except to the extent that
such compliance requires the performance of a Capital Improvement or the payment
of a Capital Imposition which are Lessor's responsibilities.
(c) Subject to the provisions of Articles XIV and XV, Lessee
covenants and agrees that during the Term it will either directly or through an
approved Manager (1) operate continuously (subject to Unavoidable Occurrences)
the Leased Property as a hotel facility, (2) keep in full force and effect and
comply in all material respects with all the provisions of the Franchise
Agreement, except Lessee shall have no obligation to complete any Capital
Improvements required by Franchisor as set forth in Article XXXVII hereof, (3)
not terminate or amend in any respect the Franchise Agreement without the
consent of Lessor, (4) maintain appropriate certifications and licenses for such
use and (5) keep Lessor advised of the status of any material litigation
affecting the Leased Property.
(d) Lessee shall not commit any waste on the Leased Property,
or in the Facility nor shall Lessee cause or permit any nuisance thereon.
(e) Lessee shall neither use nor permit the Leased Property or
any portion thereof, or Lessee's Personal Property, to be used in such a manner
as (1) would impair Lessor's (or Lessee's, as the case may be) title thereto or
to any portion thereof, or (2) would support a claim or claims of adverse usage
or adverse possession by the public, as such, or of implied dedication of the
Leased Property or any portion thereof.
7.3 Lessor to Grant Easements, etc. Lessor will, from time to
time, so long as no Event of Default has occurred and is continuing, at the
request of Lessee and at Lessee's cost and expense (but subject to the approval
of Lessor, which approval may be granted or denied in Lessor's sole discretion),
(a) grant easements and other rights in the nature of easements with respect to
the Leased Property to third parties, (b) release existing easements or other
rights in the nature of easements which are for the benefit of the Leased
Property, (c) dedicate or transfer unimproved portions of the Leased Property
for road, highway or other public purposes, (d) execute petitions to have the
Leased Property annexed to any municipal corporation or utility district, (e)
execute amendments to any covenants and restrictions affecting the Leased
Property and (f) execute and deliver to any person any instrument appropriate to
confirm or effect such grants, releases, dedications, transfers, petitions and
amendments (to the extent of its interests in the Leased Property), but only
upon delivery to Lessor of an Officer's Certificate stating that
-30-
<PAGE>
such grant, release, dedication, transfer, petition or amendment does not
interfere with the proper conduct of the business of Lessee on the Leased
Property and does not materially reduce the value of the Leased Property.
ARTICLE VIII
8.1 Compliance with Legal and Insurance Requirements, etc.
Subject to Sections 8.2, 8.3(b) and Article XII or any other provision of this
Agreement relating to permitted contests, Lessee, at its expense, will promptly
(a) comply with all applicable Legal Requirements and Insurance Requirements in
respect of the use, operation, maintenance, repair and restoration of the Leased
Property, subject however to the provisions of Section 9.1(b), and (b) procure,
maintain and comply with all appropriate licenses and other authorizations
required for any use of the Leased Property and Lessee's Personal Property then
being made, and for the proper erection, installation, operation and maintenance
of the Leased Property or any part thereof.
8.2 Legal Requirements Covenants. Subject to Section 8.3(b)
below, Lessee covenants and agrees that the Leased Property and Lessee's
Personal Property shall not be used for any unlawful purpose, and that Lessee
shall not permit or suffer to exist any unlawful use of the Leased Property by
others. Lessee shall acquire and maintain all appropriate licenses,
certifications, permits and other authorizations and approvals needed to operate
the Leased Property in its customary manner for the Primary Intended Use, and
any other lawful use conducted on the Leased Property as may be permitted from
time to time hereunder including, but not limited to, the sale and service of
alcoholic beverages (provided that Lessor shall cooperate at Lessee's sole cost
and expense, in obtaining liquor licenses to the extent necessary). Lessee
further covenants and agrees that Lessee's use of the Leased Property and
maintenance, alteration, and operation of the same, and all parts thereof, shall
at all times conform to and comply with all Legal Requirements, unless the same
are finally determined by a court of competent jurisdiction to be unlawful (and
Lessee shall cause all such sub-tenants, invitees or others to so comply with
all Legal Requirements). Lessee may, however, upon prior notice to Lessor,
contest the legality or applicability of any such Legal Requirement or any
licensure or certification decision if Lessee maintains such action in good
faith, with due diligence, without prejudice to Lessor's rights hereunder and at
Lessee's sole expense. If compliance with a Legal Requirement pending the
prosecution of any such proceeding may legally be delayed without the incurrence
of any lien, charge or liability of any kind against the Facility and without
subjecting Lessee or Lessor to any liability for failure to so comply therewith,
Lessee may delay compliance therewith until final determination of such
proceeding. If any lien, charge or liability would be incurred by reason of any
such delay, Lessee, on the prior written consent of Lessor (which consent shall
not be unreasonably withheld) and the Holder of any Mortgage, may nonetheless
contest and delay as aforesaid, provided that such contest or delay would not
subject Lessor to criminal liability and Lessee both (a) furnishes to Lessor
security reasonably satisfactory to Lessor against any loss or injury by reason
of such contest or delay, and (b) prosecutes the contest with due diligence and
good faith.
-31-
<PAGE>
8.3 Environmental Covenants. Lessor and Lessee (in addition
to, and not in diminution of, Lessee's covenants and undertakings in Sections
8.1 and 8.2 hereof) covenant and agree as follows:
(a) At all times hereafter until Lessee completely vacates the
Leased Property and surrenders possession of the same to Lessor, Lessee shall
fully comply with all Environmental Laws applicable to the Leased Property and
the operations thereon, except to the extent that such compliance would require
the remediation of Environmental Liabilities for which Lessee has no indemnity
obligations under Section 8.3(b). Lessee agrees to give Lessor prompt written
notice of (1) all Environmental Liabilities; (2) all pending, threatened or
anticipated Proceedings, and all notices, demands, requests or investigations,
relating to any Environmental Liability or relating to the issuance, revocation
or change in any Environmental Authorization required for operation of the
Leased Property; (3) all Releases at, on, in, under or in any way affecting the
Leased Property, or any Release known by Lessee at, on, in or under any property
adjacent to the Leased Property; and (4) all facts, events or conditions that
could reasonably lead to the occurrence of any of the above-referenced matters.
(b) Lessee hereby agrees to defend, indemnify and save
harmless any and all Lessor Indemnified Parties from and against any and all
Environmental Liabilities which relate to events or occurrences which occurred
during the Term of this Lease, except to the extent that the same (i) are caused
by Lessor or Lessor's agents, employees or contractors, or (ii) result from
conditions existing at the Leased Property at the date of this Lease (an
"Existing Condition") or from releases or other violations of environmental laws
originating on adjacent property but affecting the Leased Property (a
"Migration"), provided that in either case such exclusions shall not apply to
the extent that the Existing Condition or the Migration has been exacerbated by
Lessee's intentional act, negligent act or negligent failure to act.
(c) Lessor hereby agrees to defend, indemnify and save
harmless any and all Lessee Indemnified Parties from and against any and all
Environmental Liabilities to the extent that the same arise from an Existing
Condition or Migration (except as provided in Section 8.3(b) above), were caused
by Lessor or Lessor's agents, employees or contractors or relate to occurrences
after the expiration of the Term.
(d) If any Proceeding is brought against any Indemnified Party
in respect of an Environmental Liability with respect to which such Indemnified
Party may claim indemnification under either Section 8.3(b) or (c), the
Indemnifying Party, upon request, shall at its sole expense resist and defend
such Proceeding, or cause the same to be resisted and defended by counsel
designated by the Indemnifying Party and approved by the Indemnified Party,
which approval shall not be unreasonably withheld; provided, however, that such
approval shall not be required in the case of defense by counsel designated by
any insurance company undertaking such defense pursuant to any applicable policy
of insurance. Each Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel will be at the sole expense of such
Indemnified Party unless a conflict of interest prevents representation of such
Indemnified
-32-
<PAGE>
Party by the counsel selected by the Indemnifying Party and such separate
counsel has been approved by the Indemnifying Party, which approval shall not be
unreasonably withheld. The Indemnifying Party shall not be liable for any
settlement of any such Proceeding made without its consent, which shall not be
unreasonably withheld, but if settled with the consent of the Indemnifying
Party, or if settled without its consent (if its consent shall be unreasonably
withheld), or if there be a final, nonappealable judgment for an adversary party
in any such Proceeding, the Indemnifying Party shall indemnify and hold harmless
the Indemnified Parties from and against any liabilities incurred by such
Indemnified Parties by reason of such settlement or judgment.
(e) If at any time any Indemnified Party has reason to believe
circumstances exist which could reasonably result in an Environmental Liability,
upon reasonable prior written notice to Lessee or Lessor, as appropriate,
stating such Indemnified Party's basis for such belief, an Indemnified Party
shall be given immediate access to the Leased Property (including, but not
limited to, the right to enter upon, investigate, drill wells, take soil
borings, excavate, monitor, test, cap and use available land for the testing of
remedial technologies), Lessee's employees, and to all relevant documents and
records regarding the matter as to which a responsibility, liability or
obligation is asserted or which is the subject of any Proceeding; provided that
such access may be conditioned or restricted as may be reasonably necessary to
ensure compliance with law and the safety of personnel and facilities or to
protect confidential or privileged information. All Indemnified Parties
requesting such immediate access and cooperation shall endeavor to coordinate
such efforts to result in as minimal interruption of the operation of the Leased
Property as practicable. In addition to the aforesaid access, Lessor shall also
have similar access upon prior written notice to Lessee in the event that Lessor
requires such access in connection with a proposed sale or mortgage of the
Leased Property or for any other reasonable purpose. Lessor hereby agrees to
indemnify and hold harmless Lessee from and against any and all liabilities,
costs, damages, charges, fees or expenses arising from or related to the access
to or use of the Leased Property by a Lessor Indemnified Party pursuant to this
Section 8.3(e).
(f) The indemnification rights and obligations provided for in
this Article VIII shall be in addition to any indemnification rights and
obligations provided for elsewhere in this Lease.
(g) The indemnification rights and obligations provided for in
this Article VIII shall survive the termination of this Agreement.
For purposes of this Section 8.3, all amounts for which any
Indemnified Party seeks indemnification shall be computed net of (a) any actual
income tax benefit resulting therefrom to such Indemnified Party, (b) any
insurance proceeds received (net of tax effects) with respect thereto, and (c)
any amounts recovered (net of tax effects) from any third parties based on
claims the Indemnified Party has against such third parties which reduce the
damages that would otherwise be sustained; provided that in all cases, the
timing of the receipt or realization of insurance proceeds or income tax
benefits or recoveries from third parties shall
-33-
<PAGE>
be taken into account in determining the amount of reduction of damages. Each
Indemnified Party agrees to use its reasonable efforts to pursue, or assign to
Lessee or Lessor, as the case may be, any claims or rights it may have against
any third party which would materially reduce the amount of damages otherwise
incurred by such Indemnified Party.
ARTICLE IX
9.1 Maintenance and Repair.
(a) Except as provided in Section 9.1(b), Lessee will keep the
Leased Property and all private roadways, sidewalks and curbs appurtenant
thereto that are under Lessee's control, including windows and plate glass,
parking lots, HVAC, mechanical, electrical and plumbing systems and equipment
(including conduit and ductware), and non-load bearing interior walls, in good
order and repair, except for ordinary wear and tear (whether or not the need for
such repairs occurred as a result of Lessee's use, any prior use, the elements
or the age of the Leased Property, or any portion thereof but subject to the
obligation to make necessary and appropriate repairs and replacements as
provided in this Section 9.1(a)), and, except as otherwise provided in Section
9.1(b), Article XIV, Article XV or Article XXXVIII, with reasonable promptness,
make all necessary and appropriate repairs, replacements and improvements
thereto of every kind and nature, whether interior or exterior, ordinary or
extraordinary, foreseen or unforeseen or arising by reason of a condition
existing prior to the commencement of the Term of this Lease, or required by any
governmental agency having jurisdiction over the Leased Property. Lessee,
however, shall be permitted to prosecute claims against Lessor's predecessors in
title for breach of any representation or warranty or for any latent defects in
the Leased Property to be maintained by Lessee unless Lessor is already
diligently pursuing such a claim. All repairs shall, to the extent reasonably
achievable, be at least equivalent in quality to the original work. Lessee will
not take or omit to take any action, the taking or omission of which might
materially impair the value or the usefulness of the Leased Property or any part
thereof for its Primary Intended Use (except to the extent such actions are the
responsibility of Lessor pursuant to Section 9.1(b), Article XIV, Article XV or
Article XXXVIII). If Lessee fails to make any required repairs or replacements
after fifteen (15) days' notice from Lessor, or after such longer period as may
be reasonably required provided that Lessee at all times diligently proceeds
with such repair or replacement, then Lessor shall have the right, but shall not
be obligated, to make such repairs or replacements on behalf of and for the
account of Lessee. In such event, such work shall be paid for in full by Lessee
as Additional Charges.
(b) Notwithstanding Lessee's obligations under Section 9.1(a)
above but subject to the limitations on Lessor's obligations for Capital
Expenditures set forth in Article XXXVIII, unless caused by Lessee's negligence
or willful misconduct or that of its employees, contractors or agents, Lessor
shall be required to make all Capital Expenditures. Except as set forth in the
preceding sentence, Lessor shall not under any circumstances be required to
build or rebuild any improvement on the Leased Property, or to make any repairs,
replacements, alterations, restorations or renewals of any nature or description
to the Leased Property, whether
-34-
<PAGE>
ordinary or extraordinary, foreseen or unforeseen, or to make any expenditure
whatsoever with respect thereto, in connection with this Lease, or to maintain
the Leased Property in any way. Lessee hereby waives, to the extent permitted by
law, the right to make repairs at the expense of Lessor pursuant to any law in
effect at the time of the execution of this Lease or hereafter enacted. Lessor
shall have the right to give, record and post, as appropriate, notices of
non-responsibility under any mechanic's lien laws now or hereafter existing.
If Lessor fails to make any required Capital Expenditures
after the expiration of all applicable notice and cure periods set forth in
Article XXXIX, then Lessee shall have the right, but not the obligation, to make
such Capital Expenditures on behalf of and for the account of Lessor, whereupon
Lessor shall reimburse Lessee therefor promptly upon receipt of all
documentation evidencing such Capital Expenditure. Notwithstanding the
foregoing, if Lessor shall fail to make any Emergency Expenditure after the
expiration of all applicable notice and cure periods, Lessee shall have the
right to terminate this Lease upon thirty(30) days' prior notice to Lessor,
whereupon this Lease shall terminate and neither party shall have any further
rights or obligations hereunder except for (i) Lessee's obligation to pay all
Rent accrued through the termination date and (ii) any other obligations or
indemnities herein expressly stated to survive the termination hereof.
(c) Nothing contained in this Lease and no action or inaction
by Lessor shall be construed as (1) constituting the request of Lessor,
expressed or implied, to any contractor, subcontractor, laborer, materialman or
vendor to or for the performance of any labor or services or the furnishing of
any materials or other property for the construction, alteration, addition,
repair or demolition of or to the Leased Property or any part thereof, or (2)
giving Lessee any right, power or permission to contract for or permit the
performance of any labor or services or the furnishing of any materials or other
property in such fashion as would permit the making of any claim against Lessor
in respect thereof or to make any agreement that may create, or in any way be
the basis for any right, title, interest, lien, claim or other encumbrance upon
the estate of Lessor in the Leased Property, or any portion thereof.
(d) Lessee will, upon the expiration or prior termination of
the Term, vacate and surrender the Leased Property to Lessor in the condition in
which the Leased Property was originally received from Lessor, except as
repaired, rebuilt, restored, altered or added to as permitted or required by the
provisions of this Lease and except for ordinary wear and tear (subject to the
obligation of Lessee to maintain the Leased Property in good order and repair in
accordance with Section 9.1(a) above, or damage by casualty or Condemnation
(subject to the obligation of Lessee or Lessor, as applicable, to restore or
repair as set forth in this Lease).
ARTICLE X
10.1 Alterations. Subject to first obtaining the written
approval of Lessor, which shall not be unreasonably withheld (provided that the
consent of the Holder of any Mortgage and the lessor under any Ground Lease, if
required, has first been obtained), Lessee shall have the
-35-
<PAGE>
right, but not the obligation, to make such additions, modifications or
improvements to the Leased Property from time to time as Lessee deems desirable
for its permitted uses and purposes, provided that such action will not alter
the character or purposes of the Leased Property or detract from the value or
operating efficiency thereof and will not impair the revenue-producing
capability of the Leased Property or adversely affect the ability of the Lessee
to comply with the provisions of this Lease. All such work shall be performed in
a first class manner in accordance with all applicable governmental rules and
regulations and after receipt of all required permits and licenses. If
reasonably required by Lessor all such work shall be covered by performance
bonds issued by bonding companies reasonably acceptable to Lessor. The cost of
such additions, modifications or improvements to the Leased Property shall be
paid by Lessee, and all such additions, modifications and improvements shall,
without payment by Lessor at any time, be included under the terms of this Lease
and upon expiration or earlier termination of this Lease shall pass to and
become the property of Lessor. Subject to the terms and provisions of Article
XXXVIII, nothing in this Section 10.1 shall abrogate or limit Lessor's
obligation to make the Capital Expenditures set forth in the approved Capital
Budget.
10.2 Salvage. All materials which are scrapped or removed in
connection with the making of repairs pursuant to Article IX or X shall be or
become the property of Lessor or Lessee depending on which party is paying for
or providing the financing of such work.
10.3 Lessor Alterations. Lessor shall have the right, without
Lessee's consent, to make or cause to be made alterations to the Leased Property
required in connection with (i) Emergency Situations, (ii) Legal Requirements,
(iii) maintenance of the Franchise Agreement, (iv) any Mortgage, (v) any Capital
Improvement which Lessor has elected to build or install itself, as provided in
Section 3.5 hereof, or (vi) the performance by Lessor of its obligations under
this Lease. Lessor shall further have the right, but not the obligation, to make
such other additions to the Leased Property as it may reasonably deem
appropriate during the term of the Lease, subject to Lessee's approval which
shall not be unreasonably withheld. All such work unless necessitated by
Lessee's acts or omissions or unless otherwise required to be performed by
Lessee under this Lease (in which event work shall be paid for by Lessee) shall
be performed at Lessor's expense and shall be done after reasonable notice to
and coordination with Lessee, so as to minimize any disruptions or interference
with the operation of the Facility. In the event such work materially interferes
with the operation of the Facility, Base Rent shall be equitably abated. If
Lessee withholds its consent to any additions or other work which Lessor has the
right, but not the obligation, to make pursuant to the foregoing provisions of
this Section 10.3, or if the extent of abatement of Rent cannot be agreed upon,
the matter shall be referred to arbitration pursuant to the provisions of
Section 40.2.
ARTICLE XI
11.1 Liens. Subject to the provision of Article XII relating
to permitted contests, Lessee will not directly or indirectly create or allow to
remain and will promptly discharge at its expense any lien, encumbrance,
attachment, title retention agreement or claim upon the
-36-
<PAGE>
Leased Property resulting from the action or inaction of Lessee, or any
attachment, levy, claim or encumbrance in respect of the Rent, excluding,
however, (i) this Lease, (a) the matters, if any, included as exceptions or
insured against in the title policy insuring Lessor's interest in the Leased
Property, (b) restrictions, liens and other encumbrances which are consented to
in writing by Lessor, (c) liens for those taxes which Lessee is not required to
pay hereunder, (d) subleases permitted by Article XXI hereof, (e) liens for
Impositions or for sums resulting from noncompliance with Legal Requirements to
the extent Lessee is responsible hereunder for such compliance so long as (1)
the same are not yet delinquent or (2) such liens are in the process of being
contested as permitted by Article XII, (f) liens of mechanics, laborers,
suppliers or vendors for sums either disputed or not yet due provided that any
such liens for disputed sums are in the process of being contested as permitted
by Article XII hereof, and (g) liens and encumbrances created by Lessor.
ARTICLE XII
12.1 Permitted Contests. Lessee shall have the right to
contest the amount or validity of any Imposition to be paid by Lessee or any
Legal Requirement or any lien, attachment, levy, encumbrance, charge or claim
(any such Imposition, Legal Requirement, lien, attachment, levy, encumbrance,
charge or claim herein referred to as "Claims") not otherwise permitted by
Article XI, by appropriate legal proceedings in good faith and with due
diligence (but this shall not be deemed or construed in any way to relieve,
modify or extend Lessee's covenants to pay or its covenants to cause to be paid
any such charges at the time and in the manner as in this Article provided), on
condition, however, that such legal proceedings shall not operate to relieve
Lessee from its obligations hereunder and shall not cause the sale or loss of
any portion of the Leased Property, or any part thereof, or cause Lessor or
Lessee to be in default under any Mortgage or Ground Lease. Upon the request of
Lessor, as security for the payment of such claims, Lessee shall either (i)
provide a bond or other assurance reasonably satisfactory to Lessor (and to any
Holder or ground lessor, if approval thereof is required by such Holder's
Mortgage or by the Ground Lease, if applicable) that all Claims which may be
assessed against the Leased Property together with interest and penalties, if
any, thereon and legal fees anticipated to be incurred in connection therewith
will be paid, or (a) deposit within the time otherwise required for payment with
a bank or trust company as trustee upon terms reasonably satisfactory to Lessor
or with any Holder upon terms satisfactory to such Holder, money in an amount
sufficient to pay the same, together with interest and penalties thereon and
legal fees anticipated to be incurred in connection therewith, as to all Claims
which may be assessed against or become a Claim on the Leased Property, or any
part thereof, in said legal proceedings. Lessee shall furnish Lessor and any
Holder and/or ground lessor with reasonable evidence of such deposit within five
(5) days of the same. Lessor agrees to join in any such proceedings if the same
be required to legally prosecute such contest of the validity of such Claims;
provided, however, that Lessor shall not thereby be subjected to any liability
for the payment of any costs or expenses in connection with any proceedings
brought by Lessee; and Lessee covenants to indemnify and save harmless Lessor
from any such costs or expenses. Lessee shall be entitled to any refund of any
Claims and such charges and penalties or interest
-37-
<PAGE>
thereon which have been paid by Lessee or paid by Lessor and for which Lessor
has been fully reimbursed. In the event that Lessee fails to pay any Claims when
due or to provide the security therefor as provided in this paragraph and to
diligently prosecute any contest of the same, Lessor may, upon ten days advance
Notice to Lessee, pay such charges together with any interest and penalties and
the same shall be repayable by Lessee to Lessor as Additional Charges at the
next Payment Date provided for in this Lease. Lessor reserves the right to
contest any of the Claims not pursued by Lessee at Lessor's expense. Lessor and
Lessee agree to cooperate in coordinating the contest of any Claims.
ARTICLE XIII
13.1 General Insurance Requirements.
(a) Coverages. During the Term of this Lease, the Leased
Property shall at all times be insured with the kinds and amounts of insurance
described below. This insurance shall be written by companies authorized to
issue insurance in the State. The policies must name the party obtaining the
policy as the insured and the other party as an additional named insured, and
the Manager shall also be named as an additional insured under the coverages
described in Sections 13.1(a)(iv) through (xi). The Holder of any Mortgage and
the lessor under any Ground Lease shall be named as an additional insured and
loss payee, to the extent required under the terms of such Mortgage and/or
Ground Lease. Losses shall be payable, for the benefit of the respective
insureds, to Lessor or Lessee as provided in this Lease (subject to the rights
of the Holder of any Mortgage and the lessor under any Ground Lease). Any loss
adjustment for coverage insuring multiple parties shall require the written
consent of each of them, each acting reasonably and in good faith. Evidence of
insurance shall be deposited with Lessor. The policies on the Leased Property,
including the Leased Improvements, Fixtures and Lessee's Personal Property,
shall at all times satisfy the requirements of the Franchise Agreement and of
any Mortgage and Ground Lease (so long as Lessee has been furnished with a copy
of any such Mortgage and Ground Lease) affecting the Leased Property, and at a
minimum shall include:
(i) Building insurance on the "Special Form"
(formerly "All Risk" form) (including earthquake, flood and sink hole in
reasonable amounts if and as determined by Lessor) in an amount not less than
100% of the then full replacement cost thereof (as defined in Section 13.2) or
such other amount which is acceptable to Lessor, and personal property insurance
on the "Special Form" in the full amount of the replacement cost thereof;
(ii) Insurance for loss and damage (direct and
indirect) from steam boilers, pressure vessels or similar apparatus, air
conditioning systems, piping and machinery, and sprinklers, if any, now or
hereafter installed in the Facility, in the minimum amount of $5,000,000 or in
such greater amounts as are then customary;
(iii) Loss of income insurance on the "Special Form",
in the amount of one year of Rent (based on the last Lease Year of operation or,
to the extent the
-38-
<PAGE>
Leased Property has not been operated for an entire 12-month Lease Year, based
on the projected Rent for the balance of such Lease Year) for the benefit of
Lessor;
(iv) Business interruption insurance on the "Special
Form" in the amount of one year of gross profit, for the benefit of Lessee
including one year of management fees to Manager;
(v) Commercial general liability insurance, with
amounts not less than $1,000,000 combined single limit for each occurrence and
$2,000,000 for the aggregate of all occurrences within each policy year, as well
as excess liability (umbrella) insurance with limits of at least $25,000,000 per
occurrence, covering each of the following: bodily injury, death, or property
damage liability per occurrence, personal and advertising injury, general
aggregate, products and completed operations, with respect to Lessor, Lessee and
Manager, and "all risk legal liability" (including liquor law or "dram shop"
liability, if liquor or alcoholic beverages are served on the Leased Property)
with respect to Lessor, Lessee and Manager;
(vi) Fidelity bonds or blanket crime policies with
limits and deductibles as may be reasonably determined by Lessor, covering
Lessee's or Manager's employees in job classifications normally bonded under
prudent hotel management practices in the United States or otherwise required by
law;
(vii) Workers' compensation insurance to the extent
necessary to protect Lessor, Lessee and Manager and the Leased Property against
Lessee's or Manager's worker's compensation claims to the extent required by
applicable state laws;
(viii) Comprehensive form vehicle liability insurance
for owned, non-owned and hired vehicles, in the amount of $1,000,000;
(ix) Garagekeeper's legal liability insurance
covering both comprehensive and collision-type losses with a limit of liability
in keeping with prudent hotel management practice;
(x) Innkeeper's legal liability insurance covering
property of guests while on the Leased Property for which Lessor is legally
responsible (other than property in a safe deposit box), with a limit of not
less than $5,000 for any one occurrence or $25,000 in the aggregate;
(xi) Safe deposit box legal liability insurance
covering property of guests while in a safe deposit box on the Leased Property
for which Lessor is legally responsible, with a limit of not less than $100,000
for any one occurrence; and
(xii) Insurance covering such other liabilities or
hazards (such as plate glass or other common risks) and in such amounts as may
be (A) required by a Holder or (B) customary for comparable properties in the
area of the Leased Property and is available from
-39-
<PAGE>
insurance companies, insurance pools or other appropriate companies authorized
to do business in the State at rates which are economically practicable in
relation to the risks covered as may be reasonably determined by Lessor.
(b) Responsibility for Insurance. Lessee shall obtain the
insurance and pay the premiums for the coverages described in Sections
13.1(a)(iv) through (xi). Lessor shall obtain the insurance and pay the premiums
for the coverage described in Sections 13.1(a)(i) and (ii), provided that Lessee
shall reimburse Lessor immediately after demand therefor for any premiums paid
by Lessor for the coverages required under Sections 13.1(a)(i) and (ii) to the
extent that the premiums relate to coverages for property owned by Lessee or
coverages which benefit Lessee or Manager. Lessor shall obtain the insurance,
but Lessee shall pay (or reimburse Lessor) for the premium, for the coverage
described in Section 13.1(a)(iii). Insurance required by Section 13.1(a)(xii)
shall be obtained and paid for by Lessor to the extent that it relates to risks
of the type covered by the insurance obtained pursuant to Section 13.1(a)(i) and
(ii), and obtained and paid for by Lessee if it relates to risks of the type
covered by the insurance obtained pursuant to Sections 13.1(a)(v) through (xi).
The party responsible for the premium for any insurance coverage shall also be
responsible for any and all deductibles and self-insured retentions in
connection with such coverages. In the event that either party can obtain
comparable insurance coverage required to be carried by the other party from
comparable insurers and at a cost significantly less than that at which such
other party can obtain such coverage, the parties shall cooperate in good faith
to obtain such coverage at the lower cost and shall allocate the premiums
therefor in accordance with the provisions of the first sentence of this Section
13.1(b).
13.2 Replacement Cost. The term "full replacement cost" as
used herein shall mean the actual replacement cost of the Leased Property
requiring replacement from time to time including an increased cost of
construction endorsement, if available, and the cost of debris removal. In the
event either party believes that full replacement cost has increased or
decreased at any time during the Lease Term, it shall have the right to have
such full replacement cost redetermined.
13.3 Waiver of Subrogation. All insurance policies carried by
Lessor or Lessee covering the Leased Property, the Fixtures, the Facility or
Lessee's Personal Property, including, without limitation, contents, fire and
casualty insurance, shall expressly waive any right of subrogation on the part
of the insurer against the other party and Manager to the extent available
without additional cost, provided, however, if there is an additional cost, the
other party may, but shall not be obligated to, pay the same, whereupon such
waiver shall be obtained.
13.4 Form Satisfactory, etc. All of the policies of insurance
referred to in this Article XIII shall be written in a form, with deductibles
and by insurance companies satisfactory to Lessor and Lessee and shall satisfy
the requirements of any Ground Lease, Mortgage, and Franchise Agreement. The
party responsible for obtaining any policy shall pay all of the premiums
therefor, and deliver copies of such policies or certificates thereof to the
other party
-40-
<PAGE>
prior to their effective date (and, with respect to any renewal policy, not less
than ten (10) days prior to the expiration of the existing policy), and in the
event of the failure of the responsible party either to effect such insurance as
herein called for or to pay the premiums therefor, or to deliver such policies
or certificates thereof to the other party at the times required, such other
party shall be entitled, but shall have no obligation, after not less than five
(5) days' Notice to the responsible party, to effect such insurance and pay the
premiums therefor, and to be reimbursed for any such premiums upon written
demand therefor. Each insurer mentioned in this Article XIII shall agree, by
endorsement to the policy or policies issued by it, or by independent instrument
furnished to the party not responsible hereunder for obtaining such policy, that
it will give to such party not less than ten (10) days' prior written notice
before the policy or policies in question shall be materially altered, allowed
to expire or canceled.
13.5 Increase in Limits. If either Lessor or Lessee at any
time deems the limits of the personal injury or property damage under the
comprehensive public liability insurance then carried to be either excessive or
insufficient, Lessor and Lessee shall endeavor in good faith to agree on the
proper and reasonable limits for such insurance to be carried and such insurance
shall thereafter be carried with the limits thus agreed on until further change
pursuant to the provisions of this Section. If the parties fail to agree on such
limits, the matter shall be referred to arbitration as provided for in Section
40.2. In no event, however, shall such limits fail to satisfy the requirements
of the Franchise Agreement and of any Ground Lease or Mortgage.
13.6 Blanket Policy. Notwithstanding anything to the contrary
contained in this Article XIII, Lessee or Lessor may bring the insurance
provided for herein within the coverage of a so-called blanket policy or
policies of insurance carried and maintained by Lessee or Lessor; provided,
however, that the coverage afforded to Lessor, Lessee and Manager will not be
reduced or diminished or otherwise be different from that which would exist
under a separate policy meeting all other requirements of this Lease by reason
of the use of such blanket policy of insurance, and provided further that the
requirements of this Article XIII are otherwise satisfied.
13.7 Separate Insurance. Neither Lessor nor Lessee shall on
its own initiative or pursuant to the request or requirement of any third party,
take out separate insurance concurrent in form or contributing in the event of
loss with that required in this Article XIII to be furnished, or increase the
amount of any then existing insurance by securing an additional policy or
additional policies, unless all parties having an insurable interest in the
subject matter of the insurance, including in all cases Lessor, are included
therein as additional insureds, and the loss is payable under such additional
separate insurance in the same manner as losses are payable under this Lease.
Each party shall immediately notify the other party that it has obtained any
such separate insurance or of the increasing of any of the amounts of the then
existing insurance.
13.8 Reports on Insurance Claims. Lessee shall promptly
investigate and make a complete and timely written report to the appropriate
insurance company as to all accidents, all claims for damage relating to the
ownership, operation, and maintenance of the Facility, and
-41-
<PAGE>
any damage or destruction to the Facility and the estimated cost of repair
thereof and shall prepare any and all reports required by any insurance company
in connection therewith. All such reports shall be timely filed with the
insurance company as required under the terms of the insurance policy involved,
and a copy of all such reports shall be furnished to Lessor. Lessee shall not
adjust, settle or compromise any insurance loss, or execute proofs of such loss,
without Lessor's prior written consent in each instance, except that such
consent shall not be required with respect to any single casualty or other event
which does not exceed the amount of $10,000. Notwithstanding anything to the
contrary set forth in this Section 13.8, with respect to any insurance loss
under liability policies relating to any single liability claim, Lessee may
adjust, settle or compromise any such loss without Lessor's consent so long as
Lessee shall deliver to Lessor a release relinquishing Lessor from all liability
under such claim.
ARTICLE XIV
14.1 Insurance Proceeds. All proceeds of the insurance
contemplated by Sections 13.1(a)(i) and (ii) payable by reason of any loss or
damage to the Leased Property, or any portion thereof, and insured under any
policy of insurance required by Article XIII of this Lease shall, subject to the
terms of any Mortgage and/or Ground Lease, be paid to Lessor. If Lessor is not
required to repair and restore, and the Lease is terminated as described in
Section 14.2, all such insurance proceeds shall be retained by Lessor except for
any amount thereof paid with respect to Lessee's Personal Property, which shall
be paid to Lessee. All salvage resulting from any risk covered by insurance
shall belong to Lessor, except to the extent of salvage relating to Lessee's
Personal Property, which shall be paid to Lessee. All proceeds of rental
insurance contemplated by Section 13.1(a)(iii) shall be paid to Lessor.
14.2 Reconstruction in the Event of Damage or Destruction
Covered by Insurance. Except as provided in Section 14.6, if during the Term the
Leased Property is totally or partially destroyed by a risk covered by the
insurance described in Section 13.1(a)(i) or (ii) and the Facility is not
thereby rendered Unsuitable for its Primary Intended Use, Lessor shall restore
the Facility to substantially the same condition as existed immediately before
the damage or destruction and otherwise in accordance with the terms of this
Lease. Except as provided in Section 14.6, if during the Term the Leased
Property is totally or partially destroyed by a risk covered by the insurance
described in Section 13.1(a)(i) or (ii) and the Facility is thereby rendered
Unsuitable for its Primary Intended Use, Lessor may, at Lessor's option, either
(1) restore the Facility to substantially the same condition as existed
immediately before the damage or destruction and otherwise in accordance with
the terms of this Lease, or (2), subject to the provisions of Section 36.1,
terminate this Lease.
14.3 Reconstruction in the Event of Damage or Destruction Not
Covered by Insurance. Except as provided in Section 14.6, if during the Term the
Facility is totally or partially damaged or destroyed by a risk not covered by
the insurance described in Section 13.1(a)(i) or (ii), whether or not such
damage or destruction renders the Facility Unsuitable for its Primary Intended
Use, Lessor may at its option either, (a) at Lessor's sole cost and expense,
-42-
<PAGE>
restore the Facility to substantially the same condition it was in immediately
before such damage or destruction and such damage or destruction shall not
terminate this Lease, or (b) terminate this Lease. Notwithstanding the
foregoing, if such damage or destruction is not material, Lessor shall, at
Lessor's sole cost and expense, restore the Facility to substantially the same
condition as existed immediately before the damage or destruction and otherwise
in accordance with the terms of the Lease, and such damage or destruction shall
not terminate the Lease.
14.4 Lessee's Property and Business Interruption Insurance.
All insurance proceeds payable by reason of any loss of or damage to any of
Lessee's Personal Property and the business interruption insurance maintained
for the benefit of Lessee shall be paid to Lessee; provided, however, no such
payments shall diminish or reduce the insurance payments otherwise payable to or
for the benefit of Lessor hereunder.
14.5 Abatement of Rent. Any damage or destruction due to
casualty notwithstanding, this Lease shall remain in full force and effect but
Lessee's obligation to pay Base Rent shall abate during any period required for
the applicable repair and restoration to the extent the Facility is Unsuitable
for its Primary Intended Use (unless such damage was caused by Lessee's
negligence or willful misconduct, and then only to the extent such Rent is not
paid to Lessor from proceeds of insurance).
ARTICLE XV
15.1 Definitions.
(a) "Condemnation" means a Taking resulting from (1) the
exercise of any governmental power, whether by legal proceedings or otherwise,
by a Condemnor, and (2) a voluntary sale or transfer by Lessor to any Condemnor,
either under threat of condemnation or while legal proceedings for condemnation
are pending.
(b) "Date of Taking" means the date the Condemnor has the
right to possession of the property being condemned.
(c) "Award" means all compensation, sums or anything of value
awarded, paid or received on a total or partial Condemnation.
(d) "Condemnor" means any public or quasi-public authority, or
private corporation or individual, having the power of Condemnation.
15.2 Parties' Rights and Obligations. If during the Term there
is any Condemnation of all or any part of the Leased Property or any interest in
this Lease, the rights and obligations of Lessor and Lessee shall be determined
by this Article XV, subject to the provisions of any Mortgage and/or Ground
Lease.
-43-
<PAGE>
15.3 Total Taking. If title to the fee of the whole of the
Leased Property is condemned by any Condemnor, this Lease shall cease and
terminate as of the Date of the Taking by the Condemnor. If title to the fee of
less than the whole of the Leased Property is so taken or condemned, which
nevertheless renders the Leased Property Unsuitable or Uneconomic for its
Primary Intended Use, then either Lessee or Lessor shall have the option, by
notice to the other, at any time prior to the Date of Taking, to terminate this
Lease as of the Date of Taking. Upon such date, if such Notice has been given,
this Lease shall thereupon cease and terminate. All Base Rent, Participating
Rent and Additional Charges paid or payable by Lessee hereunder shall be
apportioned as of the Date of Taking, and Lessee and Lessor shall promptly pay
the other any amounts due thereby.
15.4 Allocation of Award. Subject to the rights of the Holder
of any Mortgage and the lessor under any Ground Lease, the total Award made with
respect to the Leased Property or for loss of rent, or for Lessor's loss of
business beyond the Term, shall be solely the property of and payable to Lessor.
Any Award made for loss of Lessee's business during the remaining Term, if any,
for the taking of Lessee's Personal Property, or for removal and relocation
expenses of Lessee in any such proceedings shall be the sole property of and
payable to Lessee. In any Condemnation proceedings Lessor and Lessee shall each
seek its Award in conformity herewith, at its respective cost. Neither Lessor
nor Lessee shall initiate, prosecute or acquiesce in any proceedings that may
result in a diminution of any Award payable to the other, except that Lessor and
Lessee shall equitably apportion their respective Awards to the extent that they
can not comply with the provisions of this Section.
15.5 Partial Taking. If title to less than the whole of the
Leased Property is condemned, and the Leased Property is still suitable for its
Primary Intended Use, and not Uneconomic for its Primary Intended Use, or if
Lessee or Lessor is entitled but neither elects to terminate this Lease as
provided in Section 15.3, Lessor at its cost shall with all reasonable dispatch,
but only to the extent of any condemnation awards made available to Lessor (and
such additional sums agreed to be advanced by Lessor pursuant to the next
sentence), restore the untaken portion of any Leased Improvements so that such
Leased Improvements constitute a complete architectural unit of the same general
character and condition (as nearly as may be possible under the circumstances)
as the Leased Improvements existing immediately prior to the Condemnation. If
the condemnation awards are not adequate to restore the Facility as aforesaid,
each of the Lessor and Lessee shall have the right to terminate this Lease,
without in any way affecting any Other Leases for Other Properties then in
effect, by giving Notice to the other; provided, however, that if such
termination is by Lessee, Lessor shall have the right, in Lessor's sole
discretion, to keep this Lease in full force and effect by providing, within
thirty (30) days after Lessee's Notice of termination, a Notice to Lessee of
Lessor's unconditional, legally binding obligation to be responsible for all
restoration costs in excess of the condemnation awards. Lessor shall in good
faith seek a fair and equitable allocation of any Award among restoration, taken
Leasehold Improvements and other elements. Lessor shall contribute to the cost
of restoration that part of its Award specifically allocated to such
restoration, together with severance and other damages awarded for the taken
Leased Improvements; provided, however, that the amount of such contribution
shall not exceed such cost. In the event of a partial taking
-44-
<PAGE>
affecting the Fair Market Value of the Leased Property, after which this Lease
shall not be terminated, the Base Rent shall be partially abated in a manner and
to an extent that is fair, just and equitable to both Lessee and Lessor, taking
into consideration, among other relevant factors, the number of usable rooms, or
the revenues affected by such partial taking. If Lessor and Lessee are unable to
agree upon the amount of such abatement within thirty (30) days after such
partial taking, the matter may be submitted by either party to arbitration in
accordance with Section 40.1 below for resolution.
15.6 Temporary Taking. If the whole or any part of the Leased
Property or of Lessee's interest under this Lease is condemned by any Condemnor
for its temporary use or occupancy, this Lease shall not terminate by reason
thereof, and Lessee shall continue to pay Rent, in the manner and at the times
herein specified; provided, however, that if the whole or a material portion of
the Leased Property is so taken, Lessee shall pay Base Rent, but only to the
extent of the net (i.e. after deduction of all costs, expenses, and other
obligations attendant to such Condemnation have been paid) Award made to Lessee
for such Condemnation allocable to the Term of this Lease, and to the extent of
the remaining balance, if any, of such net Award (after payment of Base Rent),
Lessee shall pay Participating Rent at a rate equal to the average Participating
Rent during the last three preceding Lease Years (or if three Lease Years shall
not have elapsed, the average during the preceding Lease Years). Except only to
the extent that Lessee may be prevented from so doing pursuant to the terms of
the order of the Condemnor, Lessee shall continue to perform and observe all of
the other terms, covenants, conditions and obligations hereof on the part of the
Lessee to be performed and observed, as though such Condemnation had not
occurred. In the event of any Condemnation as in this Section 15.6 described,
the entire amount of any Award made for such Condemnation allocable to the Term
of this Lease, whether paid by way of damages, rent or otherwise, shall be paid
to Lessee. Lessee covenants that upon the termination of any such period of
temporary use or occupancy it will, to the extent that its Award is sufficient
therefor and subject to Lessor's contribution as set forth below, restore the
Leased Property as nearly as may be reasonably possible to the condition in
which the same was immediately prior to such Condemnation, unless such period of
temporary use or occupancy extends beyond the expiration of the Term, in which
case Lessee shall not be required to make such restoration. If restoration is
required hereunder, Lessor shall, having sought a fair and equitable allocation
as provided in Section 15.5 above, contribute to the cost of such restoration
that portion of its entire Award that is specifically allocated to such
restoration in the judgment or order of the court, if any.
ARTICLE XVI
16.1 Events of Default. Any one or more of the following
events shall constitute an Event of Default hereunder:
(a) if Lessee fails to make any payment of Base Rent,
Participating Rent or Additional Charges within ten (10) days after receipt by
the Lessee of Notice from Lessor that the same has become due and payable; or
-45-
<PAGE>
(b) if Lessee fails to observe or perform any other term,
covenant or condition of this Lease and such failure is not curable, or if
curable is not cured by Lessee within a period of 30 days after receipt by the
Lessee of Notice thereof from Lessor, unless such failure is curable but cannot
with due diligence be cured within a period of 30 days, in which case it shall
not be deemed an Event of Default if (i) Lessee, within such 30 day period,
proceeds with due diligence to commence to cure the failure and thereafter
diligently completes the curing thereof within 180 days, and (ii) the failure
does not result in a notice or declaration of default under any material
contract or agreement to which Lessor, the Company, or any Affiliate of either
of them is a party or by which any of their assets are bound; or
(c) if Lessee shall (i) be generally not paying its debts as
they become due, (ii) file, or consent by answer or otherwise to the filing
against it of, a petition for relief or reorganization or arrangement or any
other petition in bankruptcy, for liquidation or to take advantage of any
bankruptcy or insolvency law of any jurisdiction, (iii) make a general
assignment for the benefit of its creditors, (iv) consent to the appointment of
a custodian, receiver, trustee or other officer with similar powers with respect
to it or with respect to any substantial part of its assets, (v) be adjudicated
insolvent or (vi) take corporate action for the purpose of any of the foregoing;
or if a court or governmental authority of competent jurisdiction shall enter an
order appointing, without consent by Lessee, a custodian, receiver, trustee or
other officer with similar powers with respect to it or with respect to any
substantial part of its assets, or if an order for relief shall be entered in
any case or proceeding for liquidation or reorganization or otherwise to take
advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering
the dissolution, winding-up or liquidation of Lessee, or if any petition for any
such relief shall be filed against Lessee and such order or petition shall not
be rescinded or dismissed within one hundred twenty (120) days; or
(d) if Lessee is liquidated or dissolved, or commences
proceedings toward such liquidation or dissolution, or, in any manner, ceases to
do business or permits the sale or divestiture of all or substantially all of
its assets; or
(e) if the estate or interest of Lessee in the Leased Property
or any part thereof is voluntarily or involuntarily transferred, assigned,
conveyed, levied upon or attached in any Proceeding, except where Lessee is
contesting and is diligently prosecuting the contest of such lien or attachment
in good faith in accordance with the terms of this Agreement; or
(f) if, except as a result of and to the extent required by
damage, destruction, Condemnation or Unavoidable Delay, Lessee voluntarily
ceases operations on the Leased Property for a period in excess of three (3)
days; or
(g) unless otherwise provided in Section 37.1 hereof, if
notice of a default or an event of default has been given by the franchisor
under the Franchise Agreement with respect to the Facility as a result of any
action or failure to act by the Lessee or Manager, which default or event of
default is not cured within applicable cure periods and does not arise from
Lessor's breach of any of its obligations under this Lease which are required to
maintain the Franchise
-46-
<PAGE>
Agreement in effect; provided that if Lessee is in good faith disputing an
assertion of default by the franchisor or is proceeding diligently to cure such
default, there shall be no default or event of default pursuant to this Section
16.1(g) for such reasonable period of time as Lessee continues to dispute in
good faith or diligently proceeds to cure and so long as the Facility continues
to be operated under the Franchise Agreement; or
(h) if an Event of Default occurs under any of the Other
Leases.
An Event of Default under this Section 16.1 shall, at the
option of Lessor, constitute an Event of Default under all of the Other Leases.
No Event of Default (other than a failure to make a payment of
money) shall be deemed to exist under Section 16.1(b) during any time the curing
of a failure described in Section 16.1(b) is prevented by an Unavoidable Delay,
provided that upon the cessation of such Unavoidable Delay, Lessee proceeds to
remedy such failure as provided in Section 16.1(b) without further delay.
If litigation is commenced with respect to any alleged default
under this Lease, the prevailing party in such litigation shall receive, in
addition to its damages incurred, such sum as the court shall determine as its
reasonable attorneys' fees, and all costs and expenses incurred in connection
therewith.
16.2 Remedies. Upon the occurrence of an Event of Default,
Lessor shall have the right, at Lessor's option, to elect to do any one or more
of the following without further notice or demand to Lessee: (a) terminate this
Lease, in which event Lessee shall immediately surrender the Leased Property and
the Inventory to Lessor, and, if Lessee fails to so surrender, Lessor shall have
the right, without notice, to enter upon and take possession of the Leased
Property and the Inventory and to expel or remove Lessee and its effects without
being liable for prosecution or any claim for damages therefor, to the extent
permitted by applicable law; and Lessee shall, and hereby agrees to, indemnify
Lessor for all loss and damage which Lessor suffers by reason of such
termination, including without limitation, damages in an amount equal to the
total of (1) the reasonable costs of recovering the Leased Property and the
Inventory in the event that Lessee does not promptly surrender the same, and all
other reasonable expenses incurred by Lessor in connection with Lessee's
default, including without limitation the following: (i) expenses for cleaning,
repairing or restoring the Leased Property; (ii) expenses for removing,
transporting, and storing any of Lessee's property left at the Leased Property
(although Lessor shall have no obligation to remove, transport, or store any
such property); (iii) expenses of reletting the Leased Property including
without limitation, brokerage commissions and reasonable attorneys' fees; (iv)
reasonable attorneys' fees and court costs; and (v) costs of carrying the Leased
Property such as repairs, maintenance, taxes and insurance premiums, utilities
and security precautions (if any); (2) the worth at the time of award of the
unpaid Rent which had been earned at the time of termination; (3) the worth at
the time of award of the amount by which the Rent which would have been earned
after termination until the time of award exceeds the amount of such rental loss
that Lessee proves could have been reasonably
-47-
<PAGE>
avoided; (4) the worth at the time of award (computed by discounting at the
discount rate of the Federal Reserve Bank of San Francisco at the time of award
plus one percent) of the amount by which the Rent for the balance of the Term
after the time of award exceeds the amount of such rental loss that Lessee
proves could be reasonably avoided; and (5) all other sums of money and damages
owing by Lessee to Lessor; or (b) enter upon and take possession of the Leased
Property without terminating this Lease and without being liable to prosecution
or any claim for damages therefor, to the extent permitted by applicable law,
and, if Lessor elects, relet the Leased Property on such terms as Lessor deems
advisable, in which event Lessee shall pay to Lessor on demand the reasonable
cost of repossessing the Leased Property and any deficiency between the Rent
payable hereunder (including Participating Rent as determined below) and the
rent paid under such reletting; provided, however, that Lessee shall not be
entitled to any excess payments received by Lessor from such reletting. Lessor's
failure to relet the Leased Property shall not release or affect Lessee's
liability for Rent or for damages; or (c) enter the Leased Property without
terminating this Lease and without being liable for prosecution or any claim for
damages therefor, and maintain the Leased Property and repair or replace any
damage thereto or do anything for which Lessee is responsible hereunder. Lessee
shall reimburse Lessor immediately upon demand for any expense which Lessor
incurs in thus effecting Lessee's compliance under this Lease, and Lessor shall
not be liable to Lessee for any damages with respect thereto. Notwithstanding
anything herein to the contrary, Lessee shall not be liable to Lessor for
consequential, punitive or exemplary damages.
The rights granted to Lessor in this Section 16.2 shall be
cumulative of every other right or remedy provided in this Lease or which Lessor
may otherwise have at law or in equity or by statute, and the exercise of one or
more rights or remedies shall not prejudice or impair the concurrent or
subsequent exercise of other rights or remedies or constitute a forfeiture or
waiver of Rent or damages accruing to Lessor by reason of any Event of Default
under this Lease.
Participating Rent for the purposes of this Section 16.2 shall
be a sum equal to (i) the average of the annual amounts of the Participating
Rent for the three 12-month Lease Years immediately preceding the Lease Year in
which the termination, re-entry or repossession takes place, or (ii) if three
12-month Lease Years shall not have elapsed, the average of the Participating
Rent during the preceding 12-month Lease Years during which the Lease was in
effect, or (iii) if one 12-month Lease Year has not elapsed, the amount derived
by annualizing the Participating Rent from the effective date of this Lease.
16.3 Waiver. Lessee waives, to the extent permitted by
applicable law, any rights of redemption available to Lessee upon the occurrence
of an Event of Default. Each party waives, to the extent permitted by applicable
law, any right to a trial by jury in any proceedings brought by either party to
enforce the provisions of this Lease, including, without limitation, proceedings
to enforce the remedies set forth in this Article XVI. Lessee waives, to the
extent permitted by applicable law, the benefit of any laws now or hereafter in
force exempting property from liability for rent or for debt, and Lessor waives,
to the extent permitted by applicable law, any right to assert an "alter ego" of
Lessee or its partners or to "pierce the
-48-
<PAGE>
corporate veil" of Lessee or its partners other than to the extent funds shall
have been inappropriately paid following a default resulting in an Event of
Default to any Person directly or indirectly having an ownership interest in
Lessee.
16.4 Application of Funds. Any payments received by Lessor
under any of the provisions of this Lease during the existence or continuance of
any Event of Default shall be applied to Lessee's obligations in the order that
Lessor may determine or as may be prescribed by the laws of the State.
ARTICLE XVII
17.1 Lessor's Right to Cure Lessee's Default. If Lessee fails
to make any payment or to perform any act required to be made or performed under
this Lease including, without limitation, Lessee's failure to comply with the
terms of any Franchise Agreement, and fails to cure the same within the relevant
time periods, if any, provided in Section 16.1, Lessor, without waiving or
releasing any obligation or default, may (but shall be under no obligation to)
at any time thereafter upon Notice to Lessee make such payment or perform such
act for the account and at the expense of Lessee, and may, to the extent
permitted by law, enter upon the Leased Property for such purpose and, subject
to Section 16.2, take all such action thereon as, in Lessor's opinion, may be
necessary or appropriate therefor. No such entry shall be deemed an eviction of
Lessee. All sums so paid by Lessor and all costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses, in each case to the
extent permitted by law) so incurred, together with a late charge thereon (to
the extent permitted by law) at the Overdue Rate from the date on which such
sums or expenses are paid or incurred by Lessor, shall be paid by Lessee to
Lessor on demand. The obligations of Lessee and rights of Lessor contained in
this Article shall survive the expiration or earlier termination of this Lease.
ARTICLE XVIII
18.1 Personal Property Limitation. Anything contained in this
Lease to the contrary notwithstanding, the average of the adjusted tax bases of
the items of Lessor's personal property that are leased to the Lessee under this
Lease at the beginning and at the end of any Lease Year shall not exceed fifteen
percent (15%) of the average of the aggregate adjusted tax bases of the Leased
Property at the beginning and at the end of such Lease Year (the "Personal
Property Limitation"). Lessor and Lessee shall at all times cooperate in good
faith and use their best efforts to permit Lessor to comply with the Personal
Property Limitation, which compliance may include, by way of example only and
not by way of limitation, the purchase by Lessee at Fair Market Value of
personal property in excess of the Personal Property Limitation and an equitable
reduction of the Rent payable by Lessee. The consideration for any such purchase
may be evidenced by and paid in accordance with an FF&E Note. All such
compliance shall be effected in a manner which has no material net economic
detriment to Lessee and will not jeopardize the Company's status as a real
estate investment trust under the applicable provisions
-49-
<PAGE>
of the Code. This Section 18.1 is intended to ensure that the Rent qualifies as
"rents from real property," within the meaning of Section 856(d) of the Code, or
any similar or successor provisions thereto, and shall be interpreted in a
manner consistent with such intent.
18.2 Sublease Rent Limitation. Anything contained in this
Lease to the contrary notwithstanding, Lessee shall not sublet the Leased
Property or enter into any similar arrangement on any basis such that the rental
or other amounts to be paid by the sublessee thereunder would be based, in whole
or in part, on either (a) the net income or profits derived by the business
activities of the sublessee, or (b) any other formula such that any portion of
the Rent would fail to qualify as "rents from real property" within the meaning
of Section 856(d) of the Code, or any similar or successor provision thereto.
18.3 Sublease Lessee Limitation. Anything contained in this
Lease to the contrary notwithstanding, Lessee shall not sublease the Leased
Property to, or enter into any similar arrangement with, any Person in which the
Company owns, directly or indirectly, a ten percent (10%) or more interest,
within the meaning of Section 856(d)(2)(B) of the Code, or any similar or
successor provisions thereto.
18.4 Lessee Ownership Limitation. Anything contained in this
Lease to the contrary notwithstanding, Lessor shall not take, or permit an
Affiliate of Lessor to take, any action that would cause the Company to own,
directly or indirectly, a ten percent (10%) or more interest in the Lessee
within the meaning of Section 856(d)(2)(B) of the Code, including applicable
attribution rules provide in Sections 856(d) and 318(a) of the Code, or any
similar or successor provision thereto. Anything contained in this Lease to the
contrary notwithstanding, Lessee shall not take, or permit an Affiliate of
Lessee to take, any action that would cause the Company to own, directly or
indirectly, a ten percent (10%) or more interest in the Lessee within the
meaning of Section 856(d)(2)(B) of the Code, including applicable attribution
rules provide in Sections 856(d) and 318(a) of the Code, or any similar or
successor provision thereto.
18.5 Lessee Net Worth. At all times during the Term of this
Lease, Lessee shall maintain a Net Worth in an amount equal to or greater than
the annual "base rent" under the Total Lease then in effect which provides for
the highest annual base rent.
ARTICLE XIX
19.1 Holding Over. If Lessee for any reason remains in
possession of the Leased Property after the expiration or earlier termination of
the Term, such possession shall be as a tenant at sufferance during which time
Lessee shall pay as rental each month two times the aggregate of (a) one-twelfth
(1/12th) of the aggregate Base Rent and Participating Rent payable with respect
to the last Lease Year of the Term, (b) all Additional Charges accruing during
the applicable month and (c) all other sums, if any, payable by Lessee under
this Lease with respect to the Leased Property. During such period, Lessee shall
be obligated to perform and observe all of the terms, covenants and conditions
of this Lease, but shall have no rights hereunder other
-50-
<PAGE>
than the right to the extent given by law to tenancies at sufferance, to
continue its occupancy and use of the Leased Property. Nothing contained herein
shall constitute the consent, express or implied, of Lessor to the holding over
of Lessee after the expiration or earlier termination of this Lease.
ARTICLE XX
20.1 Indemnification. Lessee will protect, indemnify, hold
harmless and defend Lessor Indemnified Parties from and against all liabilities,
obligations, claims, damages, penalties, causes of action, costs and expenses
(including, without limitation, reasonable attorneys' fees and expenses) to the
extent permitted by law, EXCLUDING THOSE RESULTING FROM A LESSOR INDEMNIFIED
PARTY'S NEGLIGENCE OR WILLFUL MISCONDUCT, imposed upon or incurred by or
asserted against Lessor Indemnified Parties by reason of: (a) any accident,
injury to or death of persons or loss of or damage to property occurring on or
about the Leased Property or adjoining sidewalks during the Term, including
without limitation any claims under liquor liability, "dram shop" or similar
laws, (b) any present or future use, misuse, non-use, condition, management,
maintenance or repair by Lessee or any of its agents, employees or invitees of
the Leased Property or Lessee's Personal Property or any litigation, proceeding
or claim by governmental entities or other third parties to which a Lessor
Indemnified Party is made a party or participant related to such use, misuse,
non-use, condition, management, maintenance, or repair thereof by Lessee or any
of its agents, employees or invitees, including any failure of Lessee or any of
its agents, employees or invitees to perform any obligations under this Lease or
imposed by applicable law (other than arising out of Condemnation proceedings
and save and except any capital improvements mandated by law which shall be the
responsibility of Lessor), (c) any Impositions that are the obligations of
Lessee pursuant to the applicable provisions of this Lease, (d) any failure on
the part of Lessee to perform or comply with any of the terms of this Lease on
the part of Lessee to be performed or complied with, and (e) the nonperformance
of any of the terms and provisions of any and all existing and future subleases
of the Leased Property to be performed by the landlord thereunder.
Lessor shall indemnify, save harmless and defend Lessee
Indemnified Parties from and against all liabilities, obligations, claims,
damages, penalties, causes of action, costs and expenses imposed upon or
incurred by or asserted against Lessee Indemnified Parties as a result of (a)
the negligence or willful misconduct of a Lessor Indemnified Party arising in
connection with this Lease or (b) any failure on the part of the Lessor to
perform or comply with any of the terms of this Lease or (c) any events
occurring subsequent to the expiration or earlier termination of this Lease.
Any amounts that become payable by an Indemnifying Party under
this Section shall be paid within ten days after liability therefor on the part
of the Indemnifying Party is determined by litigation or otherwise, and if not
timely paid, shall bear a late charge (to the extent permitted by law) at the
Overdue Rate from the date of such determination to the date of payment. Any
such amounts shall be reduced by insurance proceeds received and any other
-51-
<PAGE>
recovery (net of costs) obtained by the Indemnified Party. An Indemnifying
Party, at its expense, shall contest, resist and defend any such claim, action
or proceeding asserted or instituted against the Indemnified Party. The
Indemnified Party, at its expense, shall be entitled to participate in any such
claim, action, or proceeding, and the Indemnifying Party, at its expense, shall
be entitled to participate in any such claim, action, or proceeding, and the
Indemnifying Party may not compromise or otherwise dispose of the same without
the consent of the Indemnified Party, which may not be unreasonably withheld.
Nothing herein shall be construed as indemnifying a Lessor Indemnified Party
against its own negligent acts or omissions or willful misconduct.
Lessee's or Lessor's liability for a breach of the provisions
of this Article shall survive any termination of this Lease.
ARTICLE XXI
21.1 Subletting, Assignment and Change in Control. Subject to
the provisions of Article XVIII, Section 21.2 and any other express consents,
conditions, limitations or other provisions set forth herein, Lessee shall not,
either directly or indirectly, assign this Lease or hereafter sublease all or
any part of the Leased Property, or mortgage, pledge or encumber this Lease, or
the Lessee's leasehold estate in and to the Land or the Leased Improvements or
any portion thereof, without first obtaining the prior written consent of
Lessor, which consent may be granted or withheld in Lessor's sole and absolute
discretion. Notwithstanding the foregoing, Lessor's consent shall not be
unreasonably withheld for any sublease of a retail portion (excluding a
restaurant portion) of the Leased Improvements, provided that (i) the annual
rent to be derived from such sublease does not equal or exceed five percent (5%)
of Gross Revenues for the preceding Lease Year, and (ii) in Lessor's judgment
reasonably exercised, such sublease will not materially and adversely change the
character of the Facility. In the case of a permitted subletting, the sublease
shall comply with the provisions of Section 21.2, and in the case of a permitted
assignment, the assignee shall assume in writing and agree to keep and perform
all of the terms of this Lease on the part of Lessee to be kept and performed
and shall be, and become, jointly and severally liable with Lessee for the
performance thereof. In case of either an assignment or subletting made during
the Term, Lessee shall remain primarily liable, as principal rather than as
surety, for the prompt payment of the Rent and for the performance and
observance of all of the covenants and conditions to be performed by Lessee
hereunder. An original counterpart of any such sublease or assignment and
assumption, duly executed by Lessee and such sublessee or assignee, as the case
may be, in form and substance satisfactory to Lessor, shall be delivered
promptly to Lessor. Notwithstanding anything contained in this Lease to the
contrary, Lessee shall not enter into any sublease which sublease would have the
effect of producing income for the Lessor that is not "rents from real property"
as such term is defined in Section 856(d) of the Code.
21.2 Attornment. Lessee shall insert in each future sublease
permitted under Section 21.1 provisions to the effect that (a) such sublease is
subject and subordinate to all of
-52-
<PAGE>
the terms and provisions of this Lease and to the rights of Lessor hereunder,
(b) if this Lease terminates before the expiration of such sublease, the
sublessee thereunder will, at Lessor's option, attorn to Lessor and waive any
right the sublessee may have to terminate the sublease or to surrender
possession thereunder as a result of the termination of this Lease, and (c) if
the sublessee receives a written Notice from Lessor or Lessor's assignees, if
any, stating that an uncured Event of Default exists under this Lease, the
sublessee shall thereafter be obligated to pay all rentals accruing under said
sublease directly to the party giving such Notice, or as such party may direct.
All rentals received from the sublessee by Lessor or Lessor's assignees, if any,
as the case may be, shall be credited against the amounts owing by Lessee under
this Lease.
ARTICLE XXII
22.1 Officer's Certificates; Financial Statements; Lessor's
Estoppel Certificates and Covenants.
(a) At any time and from time to time upon not less than ten
(10) days Notice by Lessor, Lessee will furnish to Lessor an Officer's
Certificate certifying that this Lease is unmodified and in full force and
effect (or that this Lease is in full force and effect as modified and setting
forth the modifications), the date to which the Rent has been paid, whether to
the knowledge of Lessee there is any existing default or Event of Default
hereunder by Lessor or Lessee, and such other information as may be reasonably
requested by Lessor. Any such certificate furnished pursuant to this Section may
be relied upon by Lessor, any lender, any underwriter and any prospective
purchaser of the Leased Property.
(b) Lessee will furnish the following statements and operating
information to Lessor:
(1) within thirty-five (35) days after each quarter
of any fiscal year (or, in the case of the final quarter in any fiscal year,
within eighty (80) days), the most recent Consolidated Financials, as well as a
financial statement of Lessee prepared in accordance with GAAP and certified by
the chief financial officer of Lessee (which financial statement shall also
include a statement of Lessee's Net Worth and Tangible Net Worth as of the date
thereof);
(2) with reasonable promptness, such other
information respecting the financial condition, operations and affairs of Lessee
and the Leased Property (A) as Lessor or the Company may be required or may deem
desirable in its reasonable discretion to file with or provide to the SEC or any
other governmental agency or any other Person, all in the form, and either
audited or unaudited, as Lessor may request in Lessor's reasonable discretion
and all to be prepared at Lessor's expense to the extent that such information
is not otherwise maintained by Lessee in the normal course of its business.
-53-
<PAGE>
(3) at intervals specified by the Lessor, a report of
revenues, by department for the then current month which shall compare actual
revenues to the prior year period. Such revenue report shall contain the
adjusted daily rate, occupancy, RevPAR, the total Food and Beverage Sales, Room
Revenues and Other Income of the Leased Property. Such revenue report shall also
contain the revenue budget for the month and a new revenue forecast for the
month. In addition, Lessee will inform Lessor of any material changes to the
revenue budget for the two months immediately following the then current month;
(4) on the tenth (10th) day of each month, a monthly
lease calculation of the prior month, prepared in the format required by Lessor
and forwarded to Lessor, reflecting the revenues at the Facility, by department,
and the actual lease calculation for the month and year to date;
(5) at the end of each of March, June and September
of each year, Lessor may engage the Auditor, at Lessor's expense, to review the
revenues of the Facility and the monthly Lease calculations. Any such review
shall be completed by the twentieth (20th) day following the end of each of
March, June and September of each year, as applicable, and the Auditor shall
provide Lessor with a letter stating that the review has been completed and such
letter shall also state whether any material errors were found and the nature of
such errors. The quarterly operating statements reviewed at such dates prepared
by the Manager, shall be accompanied by explanations of any variances, which
explanations shall be in a form suitable for use in the Securities and Exchange
Commission ("SEC") required disclosure analysis;
(6) in January of each year, Lessor may engage the
Auditor, at Lessor's expense, to review the revenues of the Facility and the
monthly Lease calculations. Any such review shall be completed by the twentieth
(20th) day of January of each year and the Auditor shall provide Lessor with a
letter stating that the review has been completed and such letter shall also
state whether any material errors were found and the nature of such errors. A
complete audit financial package must be provided to Lessor by the tenth (10th)
Business Day of February of each year. The quarterly operating statement
reviewed at such date, prepared by Manager, shall be accompanied by explanations
of any variances, which explanations shall be in a form suitable for use in the
SEC required disclosure analysis; and
(7) within ten (10) days of Lessee's receipt thereof,
any inspection reports or notices of default received from the franchisor under
the Franchise Agreement.
(c) Lessee shall at all times during the term of this Lease,
at no cost or expense to Lessee, cooperate with Lessor's accountants and provide
them with access to all financial and other information relating to Lessee and
the Leased Property, and access to Lessee's accountants, work papers and to
otherwise assist in minimizing the cost of the audit, sufficient to enable the
Company to prepare audited financial statements in conformity with Regulation
S-X of the SEC and to enable the Company to satisfy its reporting obligations
under the Securities Exchange Act of 1934, as amended, or to prepare a
registration statement, report or disclosure statement for filing with the SEC
on behalf of the Company and/or its Affiliates and Lessee shall
-54-
<PAGE>
execute any representation letters reasonably requested by Lessor's accountants
in connection with the foregoing.
(d) At any time and from time to time upon not less than ten
(10) days notice by Lessee, Lessor will furnish to Lessee or to any person
designated by Lessee an estoppel certificate certifying that this Lease is
unmodified and in full force and effect (or that this Lease is in full force and
effect as modified and setting forth the modifications), the date to which Rent
has been paid, whether to the knowledge of Lessor there is any existing default
or Event of Default on Lessee's part hereunder, and such other information as
may be reasonably requested by Lessee. Any such certificate furnished pursuant
to this section may be relied upon by Lessee, any lender, any underwriter and
any purchaser of the assets of Lessee.
ARTICLE XXIII
23.1 Lessor's Right to Inspect. Lessee shall permit Lessor and
its authorized representatives as frequently as reasonably requested by Lessor
to inspect the Leased Property and Lessee's accounts and records pertaining
thereto and make copies thereof, during usual business hours upon reasonable
advance notice, subject only to any business confidentiality requirements
reasonably requested by Lessee. In conducting such inspections Lessor shall not
unreasonably interfere with the conduct of Lessee's business. Lessee will
provide customary gratuitous accommodations, services and amenities at the
Leased Property to Lessor and its authorized representatives in connection with
such inspections.
ARTICLE XXIV
24.1 No Waiver. No failure by Lessor or Lessee to insist upon
the strict performance of any term hereof or to exercise any right, power or
remedy consequent upon a breach thereof, and no acceptance of full or partial
payment of Rent during the continuance of any such breach, shall constitute a
waiver of any such breach or of any such term. To the extent permitted by law,
no waiver of any breach shall affect or alter this Lease, which shall continue
in full force and effect with respect to any other then existing or subsequent
breach.
ARTICLE XXV
25.1 Remedies Cumulative. To the extent permitted by law but
subject to Article XXXIX and any other provisions of this Lease expressly
limiting the rights, powers and remedies of either Lessor or Lessee, each legal,
equitable or contractual right, power and remedy of Lessor or Lessee now or
hereafter provided either in this Lease or by statute or otherwise shall be
cumulative and concurrent and shall be in addition to every other right, power
and remedy and the exercise or beginning of the exercise by Lessor or Lessee of
any one or
-55-
<PAGE>
more of such rights, powers and remedies shall not preclude the simultaneous or
subsequent exercise by Lessor or Lessee of any or all of such other rights,
powers and remedies.
ARTICLE XXVI
26.1 Acceptance of Surrender. No surrender to Lessor of this
Lease or of the Leased Property or any part thereof, or of any interest therein,
shall be valid or effective unless agreed to and accepted in writing by Lessor,
and no act by Lessor or any representative or agent of Lessor, other than such a
written acceptance by Lessor, shall constitute an acceptance of any such
surrender.
ARTICLE XXVII
27.1 No Merger of Title. There shall be no merger of this
Lease or of the leasehold estate created hereby by reason of the fact that the
same person or entity may acquire, own or hold, directly or indirectly: (i) this
Lease or the leasehold estate created hereby or any interest in this Lease or
such leasehold estate and (ii) the Lessor's estate in the Leased Property.
ARTICLE XXVIII
28.1 Conveyance by Lessor. Lessor shall have the unrestricted
right to mortgage or otherwise convey the Leased Property to a Holder. If Lessor
conveys the Leased Property in accordance with the terms hereof other than to a
Holder, and the grantee or transferee of the Leased Property expressly assumes
all obligations of Lessor hereunder arising or accruing from and after the date
of such conveyance or transfer, Lessor shall thereupon be released from all
future liabilities and obligations of Lessor under this Lease arising or
accruing from and after the date of such conveyance or other transfer as to the
Leased Property and all such future liabilities and obligations shall thereupon
be binding upon the new owner.
28.2 Mortgages. Without the consent of Lessee, Lessor may from
time to time, directly or indirectly, create or otherwise cause to exist deeds
to secure debt, deeds of trust, mortgages, heretofore or hereafter granted by
Lessor or which otherwise encumber or affect the Leased Property and to any and
all advances to be made thereunder and to all renewals, modifications,
consolidations, replacements, substitutions, and extensions thereof (all of
which are herein called the "Mortgage"). This Lease and Lessee's interest
hereunder shall at all times be subject and subordinate to the lien and security
title of any Mortgage, provided, however, that for any new Mortgages granted by
Lessor (i.e., excluding any Mortgages encumbering the Leased Property upon the
commencement of this Lease, including any renewals, modifications,
consolidations, replacements, substitutions and extensions thereof) such
subordination is conditioned upon delivery to Lessee of a subordination,
nondisturbance and attornment agreement, in form and substance reasonably
satisfactory to Lessee and Holder, which agreement shall provide, among other
things, that, provided an Event of Default is not then continuing
-56-
<PAGE>
under this Lease, Lessee (i) shall be entitled to receive all Gross Revenues of
the Facility, and (ii) shall not be disturbed in its possession of the Leased
Property hereunder following a foreclosure of such Mortgage. In confirmation of
such subordination Lessee shall, at Lessor's request, promptly execute,
acknowledge and deliver any instrument which may be required to evidence
subordination to any such Mortgage and to the Holder thereof. In the event of
Lessee's failure to deliver such subordination and if the Mortgage does not
change any term of this Lease, Lessor may, in addition to any other remedies for
breach of covenant hereunder, execute, acknowledge, and deliver the instrument
as the agent or attorney-in-fact of Lessee, and Lessee hereby irrevocably
constitutes Lessor its attorney-in-fact for such purpose, Lessee acknowledging
that the appointment is coupled with an interest and is irrevocable.
Lessee shall, upon the request of Lessor or any existing or
future Holder, (i) provide Holder with copies of all licenses, permits,
occupancy agreements, operating agreements, leases, contracts and similar
agreements reasonably requested in connection with any existing or proposed
financing of the Leased Property, and (ii) execute, or cause the Manager or
other appropriate party to execute, such estoppel agreements and collateral
assignments with respect to the Facility's liquor license and any of the other
aforementioned agreements as Holder may reasonably request in connection with
any such financing, provided that no such estoppel agreement or collateral
assignment shall in any way affect the Term or affect adversely in any material
respect any rights of Lessee under this Lease.
No act or failure to act on the part of Lessor which would
entitle Lessee under the terms of this Lease, or by law, to be relieved of any
of Lessee's obligations hereunder (including, without limitation, its obligation
to pay Rent) or to terminate this Lease, shall result in a release or
termination of such obligations of Lessee or a termination of this Lease unless,
subject to the provisions of the next succeeding paragraph: (i) Lessee shall
have first given written notice of Lessor's act or failure to act to the Holder,
specifying the act or failure to act on the part of Lessor which would give
basis to Lessee's rights; and (ii) the Holder, after receipt of such notice,
shall have failed or refused to correct or cure the condition complained of
within a reasonable time thereafter (in no event more than sixty (60) days),
provided that such cure period shall include a reasonable time for such Holder
to obtain possession of the Leased Property, if possession is reasonably
necessary for the Holder to correct or cure the condition, or to foreclose such
Mortgage, if the Holder notifies the Lessee of its intention to take possession
of the Leased Property or to foreclosure such Mortgage and commences necessary
foreclosure actions within said sixty (60) days, unconditionally commits to
correct or cure such condition, and diligently pursues such cure to completion.
If such Holder is prohibited by any process or injunction issued by any court or
by reason of any action by any court having jurisdiction or any bankruptcy,
debtor rehabilitation or insolvency proceedings involving Lessor from commencing
or prosecuting foreclosure or other appropriate proceedings in the nature
thereof, provided however, that the Lease shall continue to be in full force and
effect, the times for commencing or prosecuting such foreclosure or other
proceedings shall be extended for the period of such prohibition.
-57-
<PAGE>
Lessee shall deliver by notice delivered in the manner
provided in Article XXX to any Holder who gives Lessee written notice of its
status as a Holder, at such Holder's address stated in the Holder's written
notice or at such other address as the Holder may designate by later written
notice to Lessee, a duplicate copy of any and all notices regarding any default
which Lessee may from time to time give or serve upon Lessor pursuant to the
provisions of this Lease. Copies of such notices given by Lessee to Lessor shall
be delivered to such Holder simultaneously with delivery to Lessor. No such
notice by Lessee to Lessor hereunder shall be deemed to have been given unless
and until a copy thereof has been mailed to such Holder.
At any time, and from time to time, upon not less than ten
(10) days' notice by a Holder to Lessee, Lessee shall deliver to such Holder an
estoppel certificate certifying as to the information required in paragraph (a)
of Article XXII, and such other information as may be reasonably requested by
such Holder. Any such certificate may be relied upon by such Holder.
Lessee shall cooperate in all reasonable respects, and, as
generally described in Section 33.2 of this Lease, with any transfer of the
Leased Property to a Holder that succeeds to the interest of Lessor in the
Leased Property (including, without limitation, in connection with the transfer
of any franchise, license, lease, permit, contract, agreement, or similar item
to such Holder or such Holder's designee necessary or appropriate to operate the
Leased Property), provided that all costs and expenses associated with such
transfer shall be the responsibility of Lessor or Holder, as they shall choose.
Lessor and Lessee shall cooperate in (i) including in this Lease by suitable
amendment from time to time any provision which may be requested by any proposed
lender, or may otherwise be reasonably necessary, to implement the provisions of
this Article and (ii) entering into any further agreement with or at the request
of any Holder which may be reasonably requested or required by such Holder in
furtherance or confirmation of the provisions of this Article; provided,
however, that any such amendment or agreement shall not in any way affect the
Term nor affect adversely in any material respect any rights of Lessor or Lessee
under this Lease.
Lessee acknowledges and agrees that Lessor may assign to a
Holder, as further security for the obligations secured by its Mortgage, the
rights, titles and interests assigned to Lessor by Lessee as security for this
Lease, pursuant to Article XXXII.
ARTICLE XXIX
29.1 Quiet Enjoyment. So long as Lessee pays all Rent as the
same becomes due and complies with all of the terms of this Lease and performs
its obligations hereunder, in each case within the applicable grace and/or cure
periods, if any, Lessee shall peaceably and quietly have, hold and enjoy the
Leased Property for the Term hereof, free of any claim or other action by Lessor
or anyone claiming by, through or under Lessor and not claiming by, through or
under Lessee, but subject to all liens and encumbrances subject to which the
Leased Property was conveyed to Lessor or hereafter consented to by Lessee or
provided for herein. Lessee shall
-58-
<PAGE>
have the right by separate and independent action to pursue any claim it may
have against Lessor as a result of a breach by Lessor of the covenant of quiet
enjoyment contained in this Section.
ARTICLE XXX
30.1 Notices. All notices, demands, requests, consents
approvals and other communications ("Notice" or "Notices") hereunder shall be in
writing and shall be delivered by personal delivery, express mail, overnight
courier or commercial overnight mail service, or registered or certified mail,
return receipt requested and postage prepaid, addressed as follows:
(i) if to Lessor at:
1010 Wisconsin Avenue, N.W., Suite 650
Washington, D.C. 20007
Attention: Vice President - Legal
with a copy to: DeCampo, Diamond & Ash
805 Third Avenue
New York, New York 10022
Attention: William H. Diamond, Esq.
(ii) if to Lessee at:
c/o Oak Hill Capital Management, Inc.
65 East 55th Street, 32nd Floor
New York, New York 10022
Attention: Bradford Bernstein
with copies to: (1) O'Sullivan, Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Brad Okun, Esq.
(2) MeriStar H & R Operating Company, L.P.
1010 Wisconsin Avenue, N.W., Suite 650
Washington, D.C. 20007
Attention: Christopher L. Bennett, Esq.
(3) DeCampo, Diamond & Ash
805 Third Avenue
New York, New York 10022
Attention: William H. Diamond, Esq.
-59-
<PAGE>
or to such other address or addresses as either party may hereafter designate.
Notice given by personal delivery, express mail, overnight courier or overnight
mail service shall be effective on the day of timely delivery of such Notice to
such company, and Notice given by registered or certified mail shall be complete
at the time of deposit in the U.S. Mail system, but any prescribed period of
Notice and any right or duty to do any act or make any response within any
prescribed period or on a date certain after the service of such Notice given by
registered or certified mail shall be extended five (5) days.
ARTICLE XXXI
31.1 Appraisers. If it becomes necessary to determine the Fair
Market Value of the Leased Property for any purpose of this Lease, then, except
as otherwise expressly provided in this Lease, the party required or permitted
to give Notice of such required determination shall include in the Notice the
name of a person selected to act as appraiser on its behalf. Within ten (10)
days after Notice, Lessor (or Lessee, as the case may be) shall by Notice to
Lessee (or Lessor, as the case may be) appoint a second person as appraiser on
its behalf. The appraisers thus appointed, each of whom must be a member of the
American Institute of Real Estate Appraisers (or any successor organization
thereto) with at least five (5) years experience in the State appraising
property similar to the Leased Property, shall, within ten (10) days after the
date of the Notice appointing the second appraiser, proceed to appraise the
Leased Property to determine the Fair Market Value thereof as of the relevant
date (giving effect to the impact, if any, of inflation from the date of their
decision to the relevant date); provided, however, that if only one appraiser
shall have been so appointed, then the determination of such appraiser shall be
final and binding upon the parties. If two appraisers are appointed and if the
difference between the amounts so determined does not exceed five percent (5%)
of the lesser of such amounts, then the fair market value or fair market rental
shall be an amount equal to fifty percent (50%) of the sum of the amounts so
determined. If the difference between the amounts so determined exceeds five
percent (5%) of the lesser of such amounts, then such two appraisers shall have
ten (10) days to appoint a third appraiser. If no such appraiser shall have been
appointed within such ten (10) days or within sixty (60) days of the original
request for a determination of fair market value or fair market rental,
whichever is earlier, either Lessor or Lessee may apply to any court having
jurisdiction to have such appointment made by such court. Any appraiser
appointed by the original appraisers or by such court shall be instructed to
determine the Fair Market Value within thirty (30) days after appointment of
such appraiser. The determination of the appraiser which differs most in the
terms of dollar amount from the determinations of the other two appraisers shall
be excluded, and fifty percent (50%) of the sum of the remaining two
determinations shall be final and binding upon Lessor and Lessee as the Fair
Market Value of the Leased Property. This provision for determining by appraisal
shall be specifically enforceable to the extent such remedy is available under
applicable law, and any determination hereunder shall be final and binding upon
the parties except as otherwise provided by applicable law. Lessor and Lessee
shall each pay the fees and expenses of the appraiser appointed by it and each
shall pay one-half of the fees
-60-
<PAGE>
and expenses of the third appraiser and one-half of all other costs and expenses
incurred in connection with each appraisal.
ARTICLE XXXII
32.1 Security - Assignment of Agreements. As security for
Lessee's performance of the terms and provisions of this Lease, Lessee by
executing and delivering this Lease has granted and hereby grants to Lessor, to
the extent permitted by law and which will not result in a default under the
Franchise Agreement, a security interest in all interests, agreements, contracts
and other assets of Lessee related to the Leased Property including, without
limitation, (i) Inventory, (ii) Lessee's Personal Property, (iii) all
management, franchise, concession and license agreements (including the
management or agency agreement with Manager, if any, and the Franchise
Agreement, (iv) all of Lessee's right, title and interest in and to the rents,
issues, profits, revenues, rights and benefits from the Leased Property and all
leases affecting the Leased Property and the guaranties thereof and security
deposits thereunder, and (v ) all of Lessee's right, title and interest in and
to funds on deposit, accounts receivable, and income and revenues generated by
the Leased Property or arising from the use or enjoyment of the Leased Property
(collectively, the "Collateral"). If an Event of Default shall occur, Landlord,
in addition to any other rights and remedies which it may have, shall have, and
may exercise immediately and without demand, any and all rights and remedies
granted to a secured party upon default under the Uniform Commercial Code in
effect in the State where the Leased Property is located, including, without
limiting the generality of the foregoing, the right to take possession of the
Collateral or any part thereof, and to take such other measures as Lessor may
deem necessary for the care, protection and preservation of the Collateral. Upon
request or demand of Lessor, Lessee shall at its expense assemble the Collateral
and make it available to Lessor at a convenient place acceptable to Lessor.
Lessee shall pay to Lessor on demand any and all reasonable expenses, including
legal expenses and attorneys' fees incurred or paid by Lessor in protecting the
interest in the Collateral and in enforcing the rights hereunder with respect to
the Collateral. Any notice of sale, disposition or other intended action by
Lessor with respect to the Collateral sent to Lessee in accordance with the
provisions hereof at least five (5) days prior to such action, shall constitute
commercially reasonable notice to Lessee unless otherwise required by law.
Lessee shall execute such UCC financing statements and other documents as may be
reasonably required by Lessor to perfect the security interest granted herein.
-61-
<PAGE>
ARTICLE XXXIII
33.1 Miscellaneous. Anything contained in this Lease to the
contrary notwithstanding, all claims against, and liabilities of, Lessee or
Lessor arising prior to any date of termination of this Lease shall survive such
termination. If any term or provision of this Lease or any application thereof
is invalid or unenforceable, the remainder of this Lease and any other
application of such term or provisions shall not be affected thereby. If any
late charges or any interest rate provided for in any provision of this Lease is
based upon a rate in excess of the maximum rate permitted by applicable law, the
parties agree that such charges shall be fixed at and limited to the maximum
permissible rate. Neither this Lease nor any provision hereof may be changed,
waived, discharged or terminated except by a written instrument signed by Lessor
and Lessee. All the terms and provisions of this Lease shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns. The headings in this Lease are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof. This Lease shall be
governed by and construed in accordance with the laws of the State. Lessor shall
not become or be deemed a partner or joint venturer with Lessee by reason of the
provisions of this Lease.
33.2 Transition Procedures. Upon the expiration or termination
of the Term of this Lease, for whatever reason, Lessor and Lessee shall do the
following (and the provisions of this Section 33.2 shall survive the expiration
or termination of this Lease until they have been fully performed) and, in
general, shall cooperate in good faith to effect an orderly transition of the
Facility. Nothing contained herein shall limit Lessor's rights and remedies
under this Lease if such termination occurs as the result of an Event of
Default.
(a) Transfer of Licenses. Upon the expiration or earlier
termination of the Term, Lessee shall use its best efforts (i) to transfer to
Lessor or Lessor's nominee all licenses, operating permits and other
governmental authorizations and all contracts, including contracts with
governmental or quasi-governmental entities, that may be necessary for the
operation of the Facility (collectively, "Licenses"), or (ii) if such transfer
is prohibited by law or Lessor otherwise elects, to cooperate with Lessor or
Lessor's nominee in connection with the processing by Lessor or Lessor's nominee
of any applications for all Licenses, including Lessee continuing to operate the
liquor operations under its licenses (in which case Lessor hereby agrees to
indemnify and hold Lessee harmless as a result thereof, except for the
negligence or willful misconduct of Lessee); provided, in either case, that the
costs and expense of any such transfer or the processing of any such application
shall be paid by Lessor or Lessor's nominee.
(b) Leases and Concessions. Lessee shall assign to Lessor or
Lessor's nominee simultaneously with the termination of this Agreement, and the
assignee shall assume, all leases, contracts, concessions agreements and
agreements in effect with respect to the Facility then in Lessee's name;
provided, however, that Lessor need not assume any contract whose term will
expire more than one year after the date of the assignment by Lessee unless (i)
Lessor has previously consented to the provisions of such contract (which
consent shall not be unreasonably
-62-
<PAGE>
withheld), or (ii) this Agreement shall have been terminated by Lessor pursuant
to the provisions of Article XXXVI.
(c) Books and Records. To the extent that Lessor has not
already made or received copies thereof, all books and records (including
computer records) for the Facility kept by Lessee pursuant to Section 3.6 shall
be promptly made available to Lessor or Lessor's nominee for photocopying or
other duplication.
(d) Receivables and Payables, etc. Lessee shall be entitled to
retain all cash, bank accounts and house banks, and to collect all Gross
Revenues and accounts receivable accrued through the termination date. Lessee
shall be responsible for the payment of Rent, all operating expenses of the
Facility and all other obligations of Lessee accrued under this Lease as of the
termination date, and Lessor shall be responsible for all operating expenses of
the Facility accruing after the termination date, and any such operating
expenses relating to periods both prior to and after the termination date shall
be prorated. Lessee shall surrender the Leased Property with the amount of
Inventory required by Section 6.2(b), or otherwise pay Lessor for the amount of
the Inventory Deficiency as provided in that Section.
(e) Hotel Employees. Upon the expiration or termination of
this Lease, unless a different proration or allocation of these items was made
between Lessor and Lessee on the commencement of this Lease, Lessee shall pay or
cause to be paid, with respect to all of the employees working at the Facility
(the "Hotel Employees"), all sums due or payable to them, for the period up to
and including the termination date, all accrued (whether or not earned) wages,
salaries, bonuses, vacation, sick, bereavement, personal and other similar days
or benefits, workers' compensation, welfare benefits, deferred compensation,
savings, pension, profit-sharing, 401K and other retirement plan payments, and
similar payments, reimbursements or benefits, and Lessee expressly indemnifies
Lessor and any successor employer of any or all of the Hotel Employees from and
against any and all liability therefor. If any of the Hotel Employees are
covered by a multi-employer pension plan for which there is withdrawal liability
under Title IV of the Employee Retirement Income Security Act of 1974 as
amended, and provided the termination of this Lease is not due to an Event of
Default hereunder by Lessee, Lessor shall assume or shall cause the successor
employer to assume such withdrawal liability.
33.3 Standard of Discretion. In any provision of this Lease
requiring or permitting the exercise by Lessor or Lessee of such party's
approval, election, decision, consent, judgment, determination or words of
similar import (collectively, an "Approval"), such Approval may, unless
otherwise expressly specified in such provision, be given or withheld in such
party's reasonable discretion. Any Approval which by the terms of this Lease may
not be unreasonably withheld shall also not be unreasonably delayed.
33.4 Action for Damages. In any suit or other claim brought by
either party seeking damages against the other party for breach of its
obligations under this Lease, the party against whom such claim is made shall be
liable to the other party only for actual damages and not for consequential,
punitive or exemplary damages.
-63-
<PAGE>
33.5 Limitation on Liability. Notwithstanding any provision to
the contrary contained in this Lease, none of the directors, officers,
shareholders, partners, employees or agents of Lessee or Lessor shall have any
personal liability with respect to this Lease and the matters covered by this
Lease.
ARTICLE XXXIV
34.1 Memorandum of Lease. Lessor and Lessee shall promptly
upon the request of either enter into a short form memorandum of this Lease, in
form suitable for recording under the laws of the State in which reference to
this Lease, and all options contained herein, shall be made. The party
requesting the short form memorandum shall pay all costs and expenses of
recording such memorandum of this Lease.
ARTICLE XXXV
[Intentionally Omitted.]
ARTICLE XXXVI
36.1 Lessor's Option to Terminate Lease.
(a) In the event Lessor enters into a bona fide
contract to sell the Leased Property to a non-Affiliate or determines not to
restore the Facility pursuant to Section 14.2 after damage or destruction
thereof, then in any such event Lessor may terminate this Lease by giving not
less than thirty (30) days prior Notice to Lessee of Lessor's election to
terminate this Lease upon the closing under such contract or as of the date of
damage or destruction. Effective upon such date, this Lease shall terminate and
be of no further force and effect except as to any obligations of the parties
existing as of such date that survive termination of this Lease and all Rent
shall be adjusted as of the termination date.
(b) As compensation for the early termination of its
leasehold estate under this Article XXXVI because of a sale of the Leased
Property or a determination not to restore pursuant to Section 14.2, Lessor
shall pay to Lessee the fair market value of Lessee's leasehold estate hereunder
as of the closing of the sale or the date of damage or destruction of the Leased
Property (the "Termination Payment"). The Termination Payment shall be paid in
thirty (30) equal monthly installments, without interest, at the same time that
the Base Rent is payable hereunder, commencing the date the first such
installment of Base Rent is due after the date of sale or damage or destruction.
(c) For purposes of this Section, fair market value
of the leasehold estate means, as applicable, an amount equal to the "assumed
annual cash flow" (as defined
-64-
<PAGE>
below) for each Lease Year (including partial Lease Years) remaining in the then
current Initial Term or Renewal Term (whichever is applicable) of this Lease
after the early termination of this Lease pursuant to this Section 36.1,
discounted to such date at a rate of ten percent (10%) per annum. The "assumed
annual cash flow" shall be the "cash flow" (as defined below) generated by the
Facility for the twelve-month period ending on the last day of the month
preceding the month in which such termination occurs. "Cash flow" shall mean the
excess, if any, of (a) the sum of all revenues, receipts and proceeds received
by or for the account of Lessee and derived from or relating to the Facility for
said twelve-month period, over (b) the sum of all operating expenses in
connection with the use, occupancy, management, or operation of the Facility for
said period, including Rent, Impositions (other than those paid by Lessor), fees
under the Franchise Agreement, and any other expense for which Lessee is liable
under the terms of this Lease, but, with respect to any fees paid to the
Manager, including only such portion thereof as equals the component of such
fees that represents Manager's costs. Notwithstanding the foregoing, there shall
be credited against any Termination Payment due to Lessee any positive balance
in the Aggregate New Lease Credit for the account of Lessor. As used herein the
term "Aggregate New Lease Credit" shall mean the outstanding sum at any point in
time of the New Lease Credit for each Other Lease entered into between Lessor
and/or its Affiliates and Lessee and/or its Affiliates since the date of this
Lease, but only to the extent such New Lease Credit has not been previously
credited or applied on account of Termination Payments due under any Other
Lease. The New Lease Credit shall mean the projected cash flow for the initial
term of such Other Lease, discounted to the date of execution at a rate of 10%
per annum and amortized monthly on a straight-line basis over the initial term
of such lease.
(d) In the event that Lessor terminates this Lease
pursuant to the provisions of this Article XXXVI or pursuant to any other
provisions of this Lease except for the provisions allowing Lessor to terminate
this Lease upon the occurrence of an Event of Default, the parties agree that,
on and after the effective date of such termination, hotel personnel employed by
Lessee or Manager immediately prior to the effective date of termination will
either be employed by Lessor, or Lessor will take such other action with respect
to their employment, which may include notification of the prospective
termination of their employment, so as, in any case, to insure that Lessee does
not incur any liability pursuant to the WARN Act. Lessor hereby agrees to
defend, indemnify and hold harmless Lessee from and against any and all manner
of claims, actions, liabilities, costs and expenses (including, without
limitation, reasonable attorneys' fees and disbursements) relating to or arising
from Lessor's breach of this covenant, including, without limitation, any
liability, costs and expenses arising out of asserted or actual violation of the
requirements of the WARN Act. Further, Lessor agrees to assume all severance
pay, accrued vacation or personal leave, COBRA and similar liabilities and
obligations to the Facility's personnel, which Lessee and Manager shall or may
incur in connection with such termination of this Lease, and Lessor hereby
agrees to defend, indemnify and hold harmless Lessee and Manager from and
against any and all manner of claims, actions, liabilities, costs and expenses
(including, without limitation, reasonable attorneys' fees and disbursements)
relating to or resulting from Lessor's breach of the foregoing covenant,
including limitation, any liability, cost and expenses arising out of asserted
or actual violation of the
-65-
<PAGE>
requirements of the COBRA legislation. Upon Lessor's written request to Lessee,
Lessee shall take all action prudent and proper as Lessee, to notify, advise and
cooperate with Lessor in order to assist Lessor to comply with the WARN Act or
COBRA legislation and to mitigate Lessor's expense or liability with respect to
the WARN Act and COBRA legislation.
ARTICLE XXXVII
37.1 Compliance with Franchise Agreement. To the extent any of
the provisions of the Franchise Agreement impose a greater obligation on Lessee
than the corresponding provisions of this Lease, Lessee shall be obligated to
comply with, and to take all reasonable actions necessary to prevent breaches or
defaults under the provisions of the Franchise Agreement, except to the extent
that Lessee is prevented from complying with the Franchise Agreement because of
Lessor's acts such as its breach of its obligations pursuant to Article XXXVIII.
In the event that Lessor's failure to fund any Capital Expenditure and/or to
fulfill any PIP requirements of the franchisor under the Franchise Agreement
shall result in a termination thereof, Lessee shall not be deemed in default
hereunder and Lessor shall pay all termination fees and penalties incurred in
connection therewith. It is the intent of the parties hereto that Lessee shall
comply in every respect with the provisions of the Franchise Agreement so as to
avoid any default thereunder during the term of this Agreement. Lessee shall not
terminate or enter into any modification of the Franchise Agreement without in
each instance first obtaining Lessor's written consent. Lessor and Lessee agree
to cooperate fully with each other in the event it becomes necessary (in the
sole determination of Lessor) to obtain, at Lessor's sole cost and expense, a
franchise extension or modification or a new franchise for the Leased Property,
and in any transfer, at Lessor's sole cost and expense, of the Franchise
Agreement to Lessor or any Affiliate thereof or any other successor to Lessee
upon the termination of this Lease. Notwithstanding anything contained in this
Article XXXVII, at any time after the Commencement Date, Lessor may, in Lessor's
sole and absolute discretion, terminate (or direct Lessee to terminate) the
Franchise Agreement and enter (or direct Lessee to enter) into a new franchise
for the Leased Property; provided that (i) Lessor shall pay all termination fees
and penalties including, but not limited to, liquidated damages, if any, arising
from or related to such termination and any application fees, costs or expenses
payable in connection with any new franchise of the Leased Property obtained by
Lessor, and (ii) the parties shall agree on an appropriate adjustment in the
Rent payable under this Lease in the event that the new franchise is reasonably
anticipated to have a material impact on the revenues to be derived or the
expenses to be incurred at the Facility, failing which the matter shall be
submitted to arbitration under Section 40.2.
-66-
<PAGE>
ARTICLE XXXVIII
38.1 Capital Expenditures.
(a) Lessor shall be obligated to set up and maintain a reserve
(the "Capital Expenditures Reserve") in an amount equal to four percent (4%) of
Gross Revenues from the Facility during each Lease Year for Capital Expenditures
at the Facility and/or the Other Properties during such Lease Year. The ability
to pool the four percent (4%) of Gross Revenues from this Facility in the
Capital Expenditures Reserve established pursuant to this Lease and the Other
Leases shall be subject to any restrictions contained in any Mortgage or Ground
Lease encumbering the Leased Property. Upon written request by Lessee to Lessor
stating the specific use to be made and subject to the reasonable approval
thereof by Lessor, such funds shall be made available by Lessor for Capital
Expenditures set forth in the Capital Budget; provided, however, that no Capital
Expenditures shall be used to purchase property (other than "real property"
within the meaning of Treasury Regulations Section 1.856-3(d)), to the extent
that doing so would cause the Lessor to recognize income other than "rents from
real property" as defined in Section 856(d) of the Code. Lessor's obligation to
fund the Capital Expenditures Reserve shall be cumulative, but not compounded,
and any amounts that have accrued hereunder shall be payable in future periods
for such uses and in accordance with the procedure set forth herein. Lessee
shall have no interest in any accrued obligation of Lessor hereunder after the
termination of this Lease. All Capital Improvements shall be owned by Lessor
subject to the provisions of this Lease.
(b) Lessor's obligation for Capital Expenditures and for
compliance with the provisions of this Lease which may require the availability
of funds for Capital Improvements shall be limited to amounts available in the
Capital Expenditures Reserve and such additional amounts as Lessor may agree to
make available to Lessee in Lessor's sole discretion; provided, however, that if
additional Capital Expenditures are required to meet Emergency Situations,
Lessor shall make such amounts available to Lessee and receive a pro rata credit
therefor against amounts which Lessor is obligated to contribute to the Capital
Expenditures Reserve during the ensuing five (5) Lease Years (or during the
balance of the then current Initial Term or Renewal Term, as applicable, if
there are fewer than five (5) years remaining in such Term). No arbitration
resulting from the failure of Lessor and Lessee to agree on the Capital Budget
shall increase Lessor's obligation for Capital Expenditures beyond the amount
set forth in the immediately preceding sentence. In the event that there is a
Capital Improvement in the Capital Budget which exceeds the amounts Lessor is
obligated to provide under this Article XXXVIII and Lessor declines to make such
Capital Improvement, if Lessee shall disagree with such decision, the matter may
be submitted to arbitration pursuant to Section 40.2 hereof. To the extent that
Lessee's obligations under this Lease (including, without limitation, the
obligations set forth in Sections 7.2, 8.1 and 9.1 and in Article XXXVII) are
dependent upon the availability of amounts for Capital Expenditures which exceed
the amounts that Lessor is obligated to provide pursuant to this Article
XXXVIII, such obligations of Lessee shall be correspondingly diminished unless
Lessor has agreed (in its sole discretion) to make such additional amounts
available.
-67-
<PAGE>
(c) Prior to the final three (3) Lease Years of the Initial
Term or the final two (2) years of any Renewal Term (any such three or two-year
period being hereinafter referred to as the "Twilight Years"), the
implementation of all Capital Improvements made pursuant to the requirements of
the Capital Budget shall be subject to the approval of Lessor and Lessee. Such
approval shall extend both to the plans and specifications (including matters of
design and decor) and to the contracting and purchasing of all labor, services
and materials. In the event that Lessor and Lessee are unable to agree on any
aspect of the implementation of a Capital Improvement to be made pursuant to the
Capital Budget prior to the Twilight Years, such matter shall be referred to
arbitration as provided in Section 40.2. During the Twilight Years, Lessor shall
have sole authority with regard to the implementation of all such Capital
Improvements but shall consult with Lessee in connection therewith.
(d) If requested by Lessor, Lessee (or Manager, if Lessee so
directs) shall be responsible for supervising the design, installation and
construction of all Capital Improvements, for which Lessee shall be paid a
supervisory fee (the "Supervisory Fee"). The Supervisory Fee shall equal the sum
of (i) Lessee's (or Manager's) actual reasonable expenses incurred in performing
these services, plus (ii) an amount equal to 10% of such expenses, but shall in
no event exceed the then customary amount paid to hotel lessees or managers for
such services. The amount of the Supervisory Fee shall be in an approved Capital
Budget, shall be paid as a Capital Expenditure and shall be subject to the
limitations of the provisions of subsection (b) and Section 3.5 hereof. Lessee's
expenses shall include a reasonable allocation (as determined in good faith by
Lessee) of the salaries, bonuses, benefits, travel, and related expenses
incurred by Lessee's (or Manager's) personnel in the performance of these
services.
38.2 Major Renovation. If during any consecutive twelve (12)
month period during the Term of this Lease, a Major Renovation of the Facility
is undertaken, either pursuant to (i) the agreed upon Capital Budget, or (ii) as
otherwise agreed to by Lessor, Lessor and Lessee shall agree on an appropriate
adjustment, if any, in the Rent payable under this Lease after the completion of
such Major Renovation, if it is reasonably anticipated that such Major
Renovation will have a material impact on the revenues to be derived or expenses
to be incurred at the Facility. In the event that Lessor and Lessee are unable
to agree upon any Rent adjustment pursuant to this Section 38.2, after using
good faith efforts to do so, the matter shall be submitted to arbitration under
Section 40.2 hereof.
ARTICLE XXXIX
39.1 Lessor's Default. It shall be a breach of this Lease if
Lessor fails to observe or perform any term, covenant or condition of this Lease
on its part to be performed and such failure continues for a period of thirty
(30) days after Notice thereof from Lessee, unless such failure cannot with due
diligence be cured within a period of thirty (30) days, in which case such
failure shall not be deemed a breach if Lessor proceeds within such thirty (30)
day period, with due diligence, to commence to cure the failure and thereafter
diligently completes the curing thereof. The time within which Lessor shall be
obligated to cure any such
-68-
<PAGE>
failure also shall be subject to extension of time due to the occurrence of any
Unavoidable Delay. If Lessor does not cure any such failure within the
applicable time period as aforesaid, Lessee may declare the existence of a
"Lessor Default" by a second Notice to Lessor. Thereafter, subject to the
provisions of the following paragraph, Lessee may forthwith cure the same.
Except as otherwise expressly provided in this Lease or in the event of a
constructive eviction by Lessor, Lessee shall have no right to terminate this
Lease for any Lessor Default and no right, for any such Lessor Default, to
offset or counterclaim against any Rent or other charges due hereunder.
If Lessor shall in good faith dispute the occurrence of any
Lessor Default and Lessor, before the expiration of the applicable cure period,
shall give Notice thereof to Lessee, setting forth, in reasonable detail, the
basis therefor, no Lessor Default shall be deemed to have occurred and Lessor
shall have no obligation with respect thereto until final adverse determination
thereof, whether through arbitration or otherwise; provided, however, that in
the event of any such adverse determination, Lessor shall pay to Lessee interest
on any disputed funds at the Overdue Rate, from the date demand for such funds
was made by Lessee until paid. If Lessee and Lessor shall fail, in good faith,
to resolve any such dispute within ten (10) days after Lessor's Notice of
dispute, either may submit the matter for determination by arbitration, but only
if such matter is required to be submitted to arbitration pursuant to any
provision of this Lease, or otherwise by a court of competent jurisdiction.
39.2 Limitation of Lessor's Liability. Notwithstanding any
provision to the contrary contained in this Lease, Lessee acknowledges that, in
enforcing its rights hereunder or in satisfaction of any judgment obtained
against Lessor, Lessee's sole recourse shall be the right, title and interest of
Lessor in and to the Leased Property.
ARTICLE XL - ARBITRATION
40.1 Arbitration. Unless arbitration pursuant to Section 40.2
is expressly called for in this Lease, in each case specified in this Lease in
which it shall become necessary to resort to arbitration, such arbitration shall
be determined as provided in this Section 40.1. The party desiring such
arbitration shall give Notice to that effect to the other party, and an
arbitrator shall be selected by mutual agreement of the parties, or if they
cannot agree within thirty (30) days of such notice, by appointment made by the
American Arbitration Association ("AAA") from among the members of its panels
who are qualified and who have experience in resolving matters of a nature
similar to the matter to be resolved by arbitration.
40.2 Alternative Arbitration. In each case specified in this
Lease for a matter to be submitted to arbitration pursuant to the provisions of
this Section 40.2, Lessor and Lessee shall designate any nationally recognized
accounting firm with a hospitality division to serve as arbitrator of such
dispute within fifteen (15) days after written demand for arbitration is
received or sent by a party. In the event the parties shall fail to make such
designation within such fifteen (15) day period, or no nationally recognized
accounting firm satisfying such qualifications
-69-
<PAGE>
is available and willing to serve as arbitrator, the arbitration shall instead
be administered as set forth in Section 40.1.
40.3 Arbitration Procedures. In any arbitration commenced
pursuant to Section 40.1 or 40.2, a single arbitrator shall be designated and
shall resolve the dispute. The arbitrator's decision shall be binding on all
parties and shall not be subject to further review or appeal except as otherwise
allowed by applicable law. Upon the failure of either party (the "non-complying
party") to comply with his decision, the arbitrator shall be empowered, at the
request of the other party, to order such compliance by the non-complying party
and to supervise or arrange for the supervision of the non-complying party's
obligation to comply with the arbitrator's decision, all at the expense of the
non-complying party. To the maximum extent practicable, the arbitrator and the
parties, and the AAA if applicable, shall take any action necessary to insure
that the arbitration shall be concluded within ninety (90) days of the filing of
such dispute. The fees and expenses of the arbitrator shall be shared equally by
Lessor and Lessee except as otherwise specified in this Section 40.3. Unless
otherwise agreed in writing by the parties or required by the arbitrator or AAA,
if applicable, arbitration proceedings hereunder shall be conducted in the
State. Notwithstanding formal rules of evidence, each party may submit such
evidence as each party deems appropriate to support its position and the
arbitrator shall have access to and right to examine all books and records of
Lessee and Lessor regarding the Facility during the arbitration.
-70-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Lease by
their duly authorized representatives as of the date first above written.
LESSOR
MIP _______________, LLC, a Delaware limited
liability company
By: MeriStar Investment Partners, L.P., a Delaware
limited partnership, its sole member
By: MIP Lessee, LP, a Delaware limited
partnership, its general partner
By: MIP GP, LLC, a Delaware limited
liability company, a general partner
By: MeriStar H & R Operating Company,
L.P., a Delaware limited
partnership, its manager
By: MeriStar Hotels & Resorts,
Inc., a Delaware corporation,
its general partner
By: ________________________
Name:
Title:
-71-
<PAGE>
LESSEE
MIP LESSEE, L.P., a Delaware limited partnership
By: MIP GP, LLC, a Delaware limited liability
company, a general partner
By: MeriStar H & R Operating Company, L.P.,
a Delaware limited partnership, its
manager
By: MeriStar Hotels & Resorts Inc., a
Delaware corporation, its general
partner
By: _____________________________
Name:
Title:
-72-
<PAGE>
EXHIBIT A - Other Properties
1. The hotel formerly known as Holiday Inn Iowa City, 210 South Dubuque
Street, Iowa City (Johnson County), Iowa
2. Hilton Minneapolis/St. Paul Airport, 3800 East 80th Street, Bloomington
(Hennepin County), Minnesota
3. Raddison Resort & Spa Scottsdale, 7171 North Scottsdale Road, Scottsdale
(Maricopa County), Arizona
4. Raddison Hotel San Diego, 1433 Camino Del Rio South, San Diego (San Diego
County), California
<PAGE>
EXHIBIT B
[See attached legal description]
<PAGE>
EXHIBIT C
[See attached]
<PAGE>
EXHIBIT D - FORM OF FF&E NOTE
SECURED TERM NOTE
(insert name of hotel
in parentheses)
$____________ (insert hotel location)
________, 199_
FOR VALUE RECEIVED, the undersigned promises to pay to the
order of ___________________________________ ("Payee") c/o MeriStar
Investment Partners, L.P., 1010 Wisconsin Avenue, N.W., Washington,
D.C. 20007 or, at the holder's option, at such other place as may be
designated from time to time by the holder, the principal sum of
_____________ Dollars ($________) in lawful money of the United States
of America, in twenty equal consecutive quarterly installments of
principal and interest in the amount of $___________ each, commencing
__________, 199_ and payable on the first day of each quarter
thereafter, to and ending ___________. This Note shall bear interest
until maturity (whether by acceleration or otherwise) at a per annum
rate of 10%. After maturity, whether by acceleration or otherwise, this
Note shall bear interest at a per annum rate of 3% greater than the
rate of interest otherwise applicable to this Note. In no event shall
the rate of interest on this Note exceed the maximum rate authorized by
applicable law. Interest will be calculated for each day at 1/360th of
the applicable per annum rate, which will result in a higher effective
annual rate.
The undersigned shall have the right to prepay at any time, without premium, all
or any portion of the principal indebtedness evidenced by this Note,
together with accrued interest on the principal so prepaid to the date
of such prepayment, provided that any partial prepayment of principal
shall be applied upon installments of this Note in inverse order of
maturity.
If any installment of this Note is not paid when due, whether because such
installment becomes due on a Saturday, Sunday or a banking holiday, or
for any other reason, the undersigned will pay interest thereon at the
applicable rate until the date of actual receipt of such installment by
the holder of this Note.
Any holder of this Note may declare all indebtedness evidenced by this Note to
the immediately due and payable whenever such holder has the right to
do so under any security agreement or other agreement, now or
hereafter in effect, pursuant to which payment of the indebtedness
evidenced by this Note is secured including, without limitation, the
General Security Agreement, dated as of even date herewith between the
undersigned and Payee or, irrespective of the terms or existence of any
such security agreement or other agreement, upon the happening of any
of the
<PAGE>
following events: (1) nonpayment when the same becomes due, whether by
acceleration or otherwise, of principal of, or interest on, this Note;
(2) default by the undersigned in the payment or performance of any
obligation, term, condition or event of default of any other agreement
between the undersigned and the holder hereof; (3) the filing by or
against the undersigned of a request or petition for liquidation,
reorganization, arrangement, adjustment of debts, adjudication as a
bankrupt, relief as a debtor or other relief under the bankruptcy,
insolvency or similar laws of the United States or any state or
territory thereof or any foreign jurisdiction, now or hereafter in
effect; (4) the making of any general assignment by the undersigned for
the benefit of creditors; (5) the appointment of a receiver or trustee
for the undersigned or for any assets of the undersigned, including,
without limitation, the appointment of, or taking possession by, a
"custodian", as defined in the Federal Bankruptcy Code; (6) the
occurrence of any event described in clause (3), (4) or (5) of this
paragraph with respect to any endorser, guarantor or any other party
liable for, or whose assets or any interest therein secures, payment of
any indebtedness evidenced by this Note, or the occurrence of any such
event with respect to any general partner of any maker hereof, if any
such make is a partnership; (7) nonpayment by the undersigned when due,
whether by acceleration, demand or otherwise, of any indebtedness for
borrowed money owing to any party other than Payee, or the occurrence
of any event which could result in acceleration of the time for payment
of any such indebtedness; (8) if any certificate, statement,
representation, warranty or audit heretofore or hereafter furnished by
or on behalf of the undersigned, as an inducement to Payee to extend
any credit to or for entry into any agreement with the undersigned,
proves to have been false in any material respect at the time of which
the facts therein set forth were stated or certified, or to have
omitted any substantial contingency or unliquidated liability or claim
against the undersigned; or (9) if the holder hereof in good faith
believes that the prospect of payment of all or any part of the
indebtedness evidenced by this Note is impaired.
No failure by the holder hereof to exercise, and no delay in exercising, any
right or remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise by such holder of any right or remedy
hereunder preclude any other or further exercise thereof or the
exercise of any other right to remedy. The rights and remedies of the
holder hereof as herein specified are cumulative and not exclusive of
any other rights or remedies which such holder may otherwise have,
including, without limitation, any rights or remedies under the
aforesaid General Security Agreement.
No modification, rescission, waiver, forbearance, release or amendment of any
provision of this Note shall be made, except by a written agreement
duly executed by the undersigned and the holder hereof.
This Note shall be governed by the laws of the State of ---[insert state of
hotel site]---. The undersigned agrees to pay all costs and expenses
incurred by the holder hereof in enforcing this Note, including,
without limitation, actual attorneys' fees.
D-2
<PAGE>
Payment of this Note is secured by collateral granted to Payee by the aforesaid
General Security Agreement and such other documents as may have been or
may hereafter be executed in favor of Payee by the maker of this Note
or any other party.
D-3
<PAGE>
EXHIBIT D
Hotels Not Subject to Exclusivity Agreement
None.
<PAGE>
Exhibit E
Example of Section 10.1.2 distributions
- --------------------------------------------------------------------------------
Simplifying assumptions:
All amounts invested on day 1
Oak Hill Partners: Partnership contributions 90,000,000
Opco stock price 10,000,000
-----------
Total invested 100,000,000
Opco Partners: Partnership contributions 10,000,000
All Hotel Interests and Opco stock sold on first anniversary
No Partnership distributions prior to sale
Sale price for all Hotel Interests 150,000,000
Sale price for Opco stock 14,000,000
- --------------------------------------------------------------------------------
<TABLE>
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
Operation of Section 10.1.2 Oak Hill
Opco GP Opco LP Partners Total
=========================================================
<S> <C> <C> <C> <C>
Section 10.1.2(i): Apportion proceeds 750,000 14,250,000 135,000,000 150,000,000
---------------------------------------------------------
Distributions
10.1.2(i) -- to Opco GP & LP 750,000 14,250,000 15,000,000
10.1.2(ii)(a) -- 20% IRR to Oak Hill 107,550,625 107,550,625
10.1.2(ii)(b) -- 1% to Opco LP ** 1,086,370 1,086,370
10.1.2(ii)(c) -- 1%/99% until 25% IRR to Oak Hill * 59,518 5,892,307 5,951,825
10.1.2(ii)(d) -- 2% to Opco LP ** 1,169,274 1,169,274
10.1.2(ii)(e) -- 2%/98% until 30% IRR to Oak Hill * 124,571 6,103,982 6,228,553
10.1.2(ii)(f) -- 3% to Opco LP ** 1,257,594 1,257,594
10.1.2(ii)(g) -- 3%/97% until 35% IRR to Oak Hill * 195,485 6,320,667 6,516,151
10.1.2(ii)(h) -- 4% to Opco LP ** 1,351,671 1,351,671
10.1.2(ii)(i) -- 4%/96% until 40% IRR to Oak Hill * 155,517 3,732,419 3,887,937
---------------------------------------------------------
750,000 19,650,000 129,600,000 150,000,000
</TABLE>
* IRRs to Oak Hill calculated taking into account cash from Opco stock and
previous Partnership distributions.
Example: Calculation for 25% IRR
Total investment 100,000,000
25% return (comp. quarterly) 27,442,932
------------
127,442,932
Opco stock proceeds (14,000,000)
Prior distribution (107,550,625)
------------
Required distribution 5,892,307
** Catch-up to Opco calculated by grossing up Oak Hill distributions and
multiplying by the catch-up percent.
Example: Calculation for 2% catch-up under 10.1.2(ii)(d)
Prior Oak Hill distributions 107,550,625
5,892,307
------------
113,442,932
Divide by 98% 98.00%
------------
115,758,094
Multiply by 2% 2.00%
------------
2,315,162
Prior Opco distributions (1,086,370)
(59,518)
------------
Required distribution 1,169,274
Check:
Proceeds on Opco stock 14,000,000
Oak Hill Partnership cash 129,600,000
-----------
Oak Hill total cash 143,600,000
IRR to Oak Hill 37.87%
Oak Hill Partnership cash 129,600,000
Opco promote distributions 5,400,000
-----------
Total 10.1.2(ii) cash 135,000,000
Opco LP's percent of total 4.00%
<PAGE>
Exhibit 99.6
AGREEMENT OF LIMITED PARTNERSHIP
of
MIP LESSEE, LP
March 31, 1999
<PAGE>
TABLE OF CONTENTS
Page
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
i
<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP
of
MIP LESSEE, LP
This AGREEMENT OF LIMITED PARTNERSHIP (this "Agreement") dated
as of March 31, 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.
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.
<PAGE>
2
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
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
<PAGE>
3
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
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.
<PAGE>
4
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).
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.
<PAGE>
5
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.
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>
6
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.
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
<PAGE>
7
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.
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
<PAGE>
8
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 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 ss. 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
<PAGE>
9
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.
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 ss. 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 ss. 1.704-2(c) of the Treasury Regulations.
1.62 "Nonrecourse Liability" shall have the meaning
set forth in ss. 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.
<PAGE>
10
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 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.
<PAGE>
11
1.79 "Operating Leases" shall have the meaning set
forth in Article 5.
1.80 "Operating Subsidiary" shall have the meaning
set forth in 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 ss. 1.704-2(i)(2) of the Treasury
Regulations and determined in accordance with ss. 1.704-2(i)(3) of the Treasury
Regulations.
1.85 "Partner Nonrecourse Debt" shall have the
meaning set forth in ss. 1.704-2(b)(4) of the Treasury Regulations.
1.86 "Partner Nonrecourse Deductions" shall have the
meaning set forth in ss. 1.704-2(i)(1) of the Treasury Regulations and shall be
determined in accordance with ss. 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 ss. 1.704-2(b)(2) of the Treasury Regulations and shall be
determined in accordance with ss. 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 (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.
<PAGE>
12
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 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).
<PAGE>
13
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 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).
<PAGE>
14
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 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
<PAGE>
15
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.
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.
<PAGE>
16
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) 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.
<PAGE>
17
7. Representations and Covenants.
(a) Each Partner warrants and represents to the
others that (i) it 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 Partnership under the Underlying 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
<PAGE>
18
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 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
<PAGE>
19
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 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.
<PAGE>
20
(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
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
<PAGE>
21
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.
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
<PAGE>
22
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 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
<PAGE>
23
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 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.
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
<PAGE>
24
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 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:
<PAGE>
25
(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 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.
<PAGE>
26
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 ss. 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 ss. 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 ss. 1.704-2(f)(6) of the
Treasury Regulations. This Section 9.7 is intended to comply with the minimum
gain chargeback requirement in ss. 1.704-2(f) of the Treasury Regulations and
shall be interpreted consistently therewith.
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 ss. 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 ss. 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 ss. 1.704- 2(i)(4) of the Treasury Regulations. This Section 9.8
is intended to comply with the minimum gain chargeback requirement in ss.
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 ss. 1.704-2(i)(1) of the Treasury
Regulations.
9.11 If a Limited Partner unexpectedly receives an
adjustment, allocation or distribution described in ss. 1.704-1(b)(2)(ii)(d) of
the Treasury Regulations
<PAGE>
27
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 ss. 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 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%
<PAGE>
28
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 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:
<PAGE>
29
(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, 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 Section 10.1.1 and to all Partners
pursuant to Section 10.1.2(ii) and this Section 10.1.3(ii); and
<PAGE>
30
(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 (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
<PAGE>
31
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 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
<PAGE>
32
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 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
<PAGE>
33
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 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
<PAGE>
34
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 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.
<PAGE>
35
13.4 (a) The Management Committee shall meet on a
regular basis, not less frequently than quarterly, to review the operations of
the 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 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
<PAGE>
36
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 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).
<PAGE>
37
(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 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,
<PAGE>
38
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);
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
<PAGE>
39
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 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);
<PAGE>
40
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 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
<PAGE>
41
13.6.22 take any other action which,
pursuant to the 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 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
<PAGE>
42
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
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
<PAGE>
43
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 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
<PAGE>
44
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 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;
<PAGE>
45
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.
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
<PAGE>
46
real estate investment trusts within the meaning of ss. 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.
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>
47
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 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
<PAGE>
48
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 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
<PAGE>
49
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"), (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
<PAGE>
50
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 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
<PAGE>
51
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 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
<PAGE>
52
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 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, (iii) 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 (vii) 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.
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
<PAGE>
53
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 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
<PAGE>
54
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 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
<PAGE>
55
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 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
<PAGE>
56
days after the date of the determination of the Purchase Price. At the closing,
the NonQualified 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 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
<PAGE>
57
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 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.
<PAGE>
58
17.1.3 To any Person who hereafter becomes a
Partner (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.
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
<PAGE>
59
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
(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
<PAGE>
60
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 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:
<PAGE>
61
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 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
<PAGE>
62
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, (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
<PAGE>
63
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 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>
64
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: /s/ JOHN EMERY
-------------------------------
Name: John Emery
Title: Treasurer
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: /s/ JOHN MONSKY
---------------------------,
a member
<PAGE>
OAK HILL CAPITAL MANAGEMENT PARTNERS, L.P.
By: OHCP Gen Par, L.P., its general partner
By: OHCP MGP, LLC, its general partner
By: /s/ JOHN MONSKY
---------------------------,
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: /s/ JOHN MONSKY
---------------------------,
a member
MERISTAR H & R OPERATING COMPANY, L.P.
By: MeriStar Hotels & Resorts, Inc., its
general partner
By: /s/ JOHN EMERY
-----------------------------
Name: John Emery
Title: Treasurer
<PAGE>
EXHIBIT A
---------
<TABLE>
<CAPTION>
Initial Initial Capital
Partner Commitment Proportionate Share Contribution
- ------- ---------- ------------------- ---------------
<S> <C> <C> <C>
Opco GP $500,000.00 0.50%
Oak Hill GP 500,000.00 0.50%
Opco LP 9,500,000.00 9.50%
Oak Hill LP [Aggregate Commitment [Aggregate Commitment
of Oak Hill LP, OHTE of Oak Hill LP, OHTE
OHTE and OHCMP to be and OHCMP to be
$89,500,000] 89.5%]
OHCMP
Total: $100,000,000.00 100.00%
</TABLE>
<PAGE>
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
Page No.
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
(1) Attorneys' Fees ..................................... 14
i
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), is made
and entered into as of March 31, 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>
2
"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 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
<PAGE>
3
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 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
<PAGE>
4
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
<PAGE>
5
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 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,
<PAGE>
6
if any, shall request at least two business days prior to any sale of
Registrable Securities to the underwriters.
(o) 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.
(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.
(1) 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
<PAGE>
7
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.
(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
<PAGE>
8
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 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
<PAGE>
9
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.
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
<PAGE>
10
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 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
<PAGE>
11
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' 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
<PAGE>
12
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 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.
<PAGE>
13
(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>
14
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.
(1) Attorneys' Fees. In any action or proceeding
brought to enforce any provision of this Agreement, or where any provision
hereof is validly
<PAGE>
15
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 (1)
shall survive the termination of this Agreement.
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: /s/ John Emery
----------------------------
Name: John Emery
Title: Treasurer
OAK HILL CAPITAL PARTNERS, L.P.
By: OHCP GenPar, L.P., its general partner
By: OHCP MGP, LLC, its general partner
By: /s/ John Monsky
----------------------------
Name: John Monsky
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
By: /s/ John Monsky
----------------------------
Name: John Monsky
Title: Vice President
