-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Qh8O32xEtoKUlr6LvfUmwwdgZmJ13KtbpwIK3idAEB1P0MBLu09sYyVMTHPBER5M ApPJPtBCc5ozGLfbw2+Adg== 0000889812-99-001321.txt : 19990428 0000889812-99-001321.hdr.sgml : 19990428 ACCESSION NUMBER: 0000889812-99-001321 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19990427 GROUP MEMBERS: ARBOR REIT, L.P. GROUP MEMBERS: CAPITAL PARTNERSHIP GROUP MEMBERS: CHERWELL INVESTORS, INC. GROUP MEMBERS: FW HOSPITALITY, L.P. GROUP MEMBERS: GROUP 31, INC. GROUP MEMBERS: J. TAYLOR CRANDALL GROUP MEMBERS: KEYSTONE INC ET AL GROUP MEMBERS: MC INVESTMENT CORP. GROUP MEMBERS: MHX INVESTORS, L.P. GROUP MEMBERS: OAK HILL CAPITAL MANAGEMENT PARTNERS, L.P. GROUP MEMBERS: OAK HILL CAPITAL PARTNERS, L.P. GROUP MEMBERS: PENOBSCOT PARTNERS, L.P. GROUP MEMBERS: PTJ MERCHANT BANKING PARTNERS, L.P. GROUP MEMBERS: ROBERT M. BASS SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: MERISTAR HOTELS & RESORTS INC CENTRAL INDEX KEY: 0001059341 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 510379982 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-54565 FILM NUMBER: 99602307 BUSINESS ADDRESS: STREET 1: 1010 WISCONSIN AVE NW CITY: WASHINGTON STATE: DC ZIP: 20007 BUSINESS PHONE: 2029654455 MAIL ADDRESS: STREET 1: 1010 WISCONSIN AVE N W CITY: WASHINGTON STATE: DC ZIP: 20007 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: KEYSTONE INC ET AL CENTRAL INDEX KEY: 0000924069 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 201 MAIN ST STREET 2: STE 3100 CITY: FORT WORTH STATE: TX ZIP: 76102 BUSINESS PHONE: 8173908400 MAIL ADDRESS: STREET 1: 201 MAIN ST STREET 2: STE 2600 CITY: FORT WORTH STATE: TX ZIP: 76102 SC 13D/A 1 AMENDMENT NO. 1 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. 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 EX-99.1 2 AGREEMENT 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 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 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 EX-99.5 3 STOCK PURCHASE AGREEMENT 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: 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 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. 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. 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 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. 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 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. 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 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. 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. 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 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 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 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 "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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 EXHIBIT C --------- LEASE AGREEMENT DATED AS OF MARCH 31, 1999 BETWEEN MIP _______________, LLC AS LESSOR AND MIP LESSEE, LP AS LESSEE [____________________] 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 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 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 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 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- 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- 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- 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- 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- 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- 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- (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- 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- 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- (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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- (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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- (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- 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- 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- 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- 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- 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- 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- 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- (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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- (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- 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- 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- 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- 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- 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 EXHIBIT B [See attached legal description] EXHIBIT C [See attached] 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 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 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 EXHIBIT D Hotels Not Subject to Exclusivity Agreement None. 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 - -------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------
Operation of Section 10.1.2 Oak Hill Opco GP Opco LP Partners Total ========================================================= 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
* 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% EX-99.6 4 AGREEMENT OF LIMITED PARTNERSHIP Exhibit 99.6 AGREEMENT OF LIMITED PARTNERSHIP of MIP LESSEE, LP March 31, 1999 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 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. 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 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. 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. 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. 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 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 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 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. 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. 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. 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). 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). 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 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. 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. 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 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 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. 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 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 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 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 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: 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. 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 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% 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: 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 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 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 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 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 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. 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 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). 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, 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 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); 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 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 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 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 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; 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 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 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 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 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 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 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 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 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 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 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 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 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. 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 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 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: 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 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 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. 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 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 EXHIBIT A ---------
Initial Initial Capital Partner Commitment Proportionate Share Contribution - ------- ---------- ------------------- --------------- 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%
EX-99.7 5 REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT dated as of March 31, 1999 among MERISTAR HOTELS & RESORTS, INC. and The Other Parties Listed on the Signature Pages Hereto 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 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. 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 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 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 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, 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 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 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 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 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 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 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. 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. 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 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 -----END PRIVACY-ENHANCED MESSAGE-----