-----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, TzkIyNJ5emY/NmswwrQ/1ikkuLXvJG+Eaobha6W4DL66Fs3uO3aRiwu+dZNimtFK 635YA8Y4QeU6JVb20Pzj1g== /in/edgar/work/0000928385-00-003074/0000928385-00-003074.txt : 20001114 0000928385-00-003074.hdr.sgml : 20001114 ACCESSION NUMBER: 0000928385-00-003074 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERISTAR HOTELS & RESORTS INC CENTRAL INDEX KEY: 0001059341 STANDARD INDUSTRIAL CLASSIFICATION: [7011 ] IRS NUMBER: 510379982 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-14331 FILM NUMBER: 762369 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 10-Q 1 0001.txt FORM 10-Q =============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 2000 or [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to COMMISSION FILE NUMBER 1-14331 MERISTAR HOTELS & RESORTS, INC. (Exact name of Registrant as specified in its Charter) DELAWARE 51-0379982 (State of Incorporation) (IRS Employer Identification No.) 1010 WISCONSIN AVENUE, N.W. WASHINGTON, D.C. 20007 (Address of Principal Executive Offices)(Zip Code) 202-965-4455 (Registrant's Telephone Number, Including Area Code) NONE (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period for which the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No The number of shares of Common Stock, par value $0.01 per share, outstanding at November 10, 2000 was 35,925,008. =============================================================================== MERISTAR HOTELS & RESORTS, INC. INDEX Page ---- PART I. FINANCIAL INFORMATION ITEM 1: FINANCIAL STATEMENTS (UNAUDITED) Condensed Consolidated Balance Sheets - September 30, 2000 and December 31, 1999 3 Condensed Consolidated Statements of Operations - Three Months and Nine Months Ended September 30, 2000 and 1999 4 Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2000 and 1999 5 Notes to Condensed Consolidated Financial Statements 6 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 12 ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 17 PART II. OTHER INFORMATION 18 ITEM 5: OTHER INFORMATION 18 ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K 18 2 PART I. FINANCIAL INFORMATION ITEM 1: FINANCIAL STATEMENTS MERISTAR HOTELS & RESORTS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
September 30, 2000 December 31, 1999 ------------------- ------------------ (unaudited) Assets Current Assets: Cash and cash equivalents $ 9,989 $ 1,726 Accounts receivable, net of allowance for doubtful accounts of $3,732 and $2,090 77,243 47,976 Prepaid expenses 21,921 3,589 Deposits and other 13,338 8,388 -------- -------- Total current assets 122,491 61,679 -------- -------- Fixed assets: Furniture, fixtures, and equipment 27,503 14,832 Accumulated depreciation (4,499) (2,522) -------- -------- Total fixed assets, net 23,004 12,310 -------- -------- Investments in and advances to affiliates 38,001 30,018 Intangible assets, net of accumulated amortization of $12,349 and $7,927 190,399 153,927 Deferred income taxes 904 - Restricted cash - 210 -------- -------- $374,799 $258,144 ======== ======== Liabilities, Minority Interests, and Stockholders' Equity Current Liabilities: Accounts payable, accrued expenses and other liabilities $124,878 $ 96,603 Due to MeriStar Hospitality Corporation 20,619 11,476 Income taxes payable 150 80 Long-term debt, current portion 80 10 -------- -------- Total current liabilities 145,727 108,169 Deferred income taxes 23,257 13,247 Long-term debt 95,184 57,752 -------- -------- Total liabilities 264,168 179,168 Minority interests 14,343 13,774 Commitments and contingencies Stockholders' equity: Preferred stock, par value $0.01 per share Authorized - 10,000 shares Common stock, par value $0.01 per share Authorized - 100,000 shares Issued and outstanding - 35,894 and 29,625 shares 359 296 Additional paid-in capital 74,801 57,637 Retained earnings 21,265 7,236 Accumulated other comprehensive income: Translation adjustment (53) 33 Unrealized loss on investments (84) - -------- -------- Total stockholders' equity 96,288 65,202 -------- -------- $374,799 $258,144 ======== ========
See accompanying notes to condensed consolidated financial statements. 3 MERISTAR HOTELS & RESORTS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS UNAUDITED (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended Nine Months Ended September 30, September 30, --------------------- ---------------------- 2000 1999 2000 1999 -------- --------- ---------- ---------- Revenue: Rooms $231,497 $ 226,310 $ 721,045 $697,221 Food and beverage 67,618 64,852 222,197 214,053 Corporate housing 29,369 --- 38,761 --- Other operating departments 21,593 21,551 71,187 67,212 Management and other fees 6,287 2,075 16,358 7,363 -------- --------- ---------- -------- Total revenue 356,364 314,788 1,069,548 985,849 -------- --------- ---------- -------- Operating expenses by department: Rooms 55,956 55,146 166,824 163,754 Food and beverage 51,451 50,316 162,094 159,068 Corporate housing 18,744 -- 24,781 -- Other operating departments expenses 12,693 10,245 40,246 32,484 Undistributed operating expenses: Administrative and general 58,270 49,257 173,894 157,971 Property operating costs 48,678 47,259 145,427 140,162 Participating lease expense 106,792 97,396 320,104 306,009 Depreciation and amortization 2,778 1,418 6,540 4,454 -------- --------- ---------- -------- Total operating expenses 355,362 311,037 1,039,910 963,902 -------- --------- ---------- -------- Net operating income 1,002 3,751 29,638 21,947 Interest expense, net 1,986 1,037 4,530 3,543 -------- --------- ---------- -------- Income before minority interests and income taxes (984) 2,714 25,108 18,404 Minority interests (31) 250 2,108 2,694 -------- --------- ---------- -------- Income before income taxes (953) 2,464 23,000 15,710 Income taxes (52) 911 8,971 5,812 -------- --------- ---------- -------- Net income $ (901) $ 1,553 $ 14,029 $ 9,898 ======== ========= ========== ======== Other comprehensive income: Foreign currency translation adjustment (176) (1) (86) (34) Unrealized loss on investments (12) --- (84) --- -------- --------- ---------- -------- Comprehensive income $ (1,089) $ 1,552 $ 13,859 $ 9,864 ======== ========= ========== ======== Earnings per share: Basic $ (0.03) $ 0.05 $ 0.42 $ 0.36 ======== ========= ========== ======== Diluted $ (0.03) $ 0.05 $ 0.41 $ $0.36 ======== ========= ========== ========
See accompanying notes to condensed consolidated financial statements. 4 MERISTAR HOTELS & RESORTS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED (IN THOUSANDS)
Nine Months Ended September 30, ---------------------- 2000 1999 --------- ---------- Operating activities: Net income $ 14,029 $ 9,898 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 6,540 4,454 Minority interests 2,108 2,694 Deferred income taxes 8,276 5,813 Changes in operating assets and liabilities: Accounts receivable, net (24,919) (3,487) Deposits and other (3,638) (2,510) Prepaid expenses (12,646) (7,024) Accounts payable, accrued expenses and other liabilities 11,029 (1,769) Income Taxes Payable (100) (35) Due to MeriStar Hospitality Corporation 9,143 11,059 --------- ---------- Net cash provided by operating activities 9,822 19,093 --------- ---------- Investing activities: Purchases of fixed assets (7,054) (3,641) Investments in and advances to affiliates, net (7,983) (15,465) Purchases of intangible assets (2,716) (2,860) Cash paid to BridgeStreet Accommodations shareholders (12,216) --- Change in restricted cash 210 416 --------- ---------- Net cash used in investing activities (29,759) (21,550) --------- ---------- Financing activities: Proceeds from issuance of long term debt 154,500 121,000 Principal payments on long term debt (117,124) (131,993) Purchase of OP units (1,149) --- BridgeStreet Accommodations debt repaid (12,021) --- Proceeds from issuances of common stock, net 5,494 5,879 Deferred financing costs (1,601) --- --------- ---------- Net cash provided by (used in) financing activities 28,099 (5,114) --------- ---------- Effect of exchange rate changes on cash 101 (3) Net increase (decrease) in cash and cash equivalents 8,263 (7,574) Cash and cash equivalents, beginning of period 1,726 11,155 --------- ---------- Cash and cash equivalents, end of period $ 9,989 $ 3,581 ========= ==========
See accompanying notes to condensed consolidated financial statements. 5 MERISTAR HOTELS & RESORTS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2000 UNAUDITED (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) 1. ORGANIZATION We lease, manage and operate a portfolio of hospitality properties and provide related services in the hotel, corporate housing, golf, and vacation membership markets. Our portfolio is diversified by franchise and brand affiliations. Our subsidiary, MeriStar H&R Operating Company, L.P., conducts all of our operations. We are the sole general partner of MeriStar H&R and control its operations. On August 3, 1998, American General Hospitality Corporation and CapStar Hotel Company merged together to form MeriStar Hospitality Corporation, a real estate investment trust. As part of that merger, CapStar formed our company to become the lessee, manager and operator of substantially all of the hotels owned or leased by American General and CapStar before the merger. At the time of the merger, CapStar distributed all of the shares of our common stock to its stockholders and we became a separate, publicly traded company. We manage all of the hotels CapStar leased and/or managed for third-party owners before the merger. Immediately after the merger, we acquired all of the partnership interests in AGH Leasing, L.P., the third-party lessee that leased most of the hotels American General owned. We also acquired substantially all of the assets and some liabilities of American General Hospitality, Inc., the third-party manager that managed most of the hotels American General owned. We have an intercompany agreement with MeriStar Hospitality Corporation. This provides each of us the right to participate in certain transactions entered into by each company. In particular, we have the right of first refusal to become the lessee of any real property acquired by MeriStar Hospitality Corporation. We also provide MeriStar Hospitality Corporation with certain services including administrative, renovation supervision, corporate, accounting, finance, insurance, legal, tax, information technology, human resources, acquisition identification and due diligence, and operational services. We are compensated in an amount that MeriStar Hospitality Corporation would be charged by an unaffiliated third party for comparable services. On May 31, 2000, we completed the acquisition of BridgeStreet Accommodations, Inc. BridgeStreet provides corporate housing services in the United States, Canada, and the United Kingdom. We are continuing to operate our corporate housing division under the BridgeStreet name. Our consolidated interim financial statements for the nine months ended September 30, 2000 include the operating results of BridgeStreet since May 31, 2000. As of September 30, 2000, we leased or managed 213 hotels with 46,511 rooms in 33 states, the District of Columbia, Canada, Puerto Rico and the U.S. Virgin Islands. In addition, we had approximately 3,600 apartments under lease in the United States, Canada, and the United Kingdom at September 30, 2000. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES We have prepared these unaudited interim financial statements according to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures have been omitted, which are normally included in financial statements prepared in accordance with generally accepted accounting principles. These interim financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 1999. Certain 1999 amounts have been reclassified to conform to the 2000 presentation. In our opinion, the accompanying unaudited condensed consolidated interim financial statements reflect all adjustments necessary for a fair presentation of the financial condition and results of operations and cash flows for the periods presented. The preparation of financial statements in accordance with generally accepted accounting principles requires us to make estimates and assumptions. These estimates and assumptions affect the reported amounts on our balance sheet, income statement and the disclosure of contingent assets and liabilities at the date of our financial statements. Our actual results 6 could differ from those estimates. The results of operations for the interim periods are not necessarily indicative of the results for the entire year. Our hotel participating leases have noncancelable remaining terms ranging from 9 to 13 years. The leases can be terminated earlier under certain circumstances defined in the leases. The rent payable under each participating lease is the greater of base rent or percentage rent, as defined in the lease agreement. Percentage rent applicable to room and food and beverage hotel revenue varies by lease and is calculated by multiplying fixed percentages by the total amounts of such revenues over specified threshold amounts. Both the minimum rent and the revenue thresholds used in computing percentage rents are subject to annual adjustments based on increases in the United States Consumer Price Index. Percentage rent applicable to other revenues is calculated by multiplying fixed percentages by the total amounts of such revenues. Emerging Issues Task Force Issue No. 98-9, "Accounting for Contingent Rent in Interim Financial Periods", requires a lessee to recognize contingent rental expense for interim periods prior to the achievement of the specified target that triggers the contingent rental expense, if the achievement of that target by the end of the fiscal year is considered probable. This accounting pronouncement relates only to our recognition of lease expense in interim periods for financial reporting purposes; it has no effect on the timing of rent payments under our leases or our annual lease expense calculations. We made cash lease payments in excess of the expense we were required to recognize under EITF No. 98-9 during the interim periods ended September 30, 2000 and 1999. As of September 30, 2000, we had a prepaid expense balance of $9,910 which is included on our condensed consolidated balance sheet. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 133, "Accounting for Derivative Instruments and Hedging Activities," which requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. In June 1999, the Financial Accounting Standard Board issued Statement of Financial Accounting Standard No. 137 which amended Statement of Financial Accounting Standard No. 133 to defer the effective date to all fiscal quarters of all fiscal years beginning after June 15, 2000. In June 2000, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 138 which provides additional guidance and amendments to Statement of Financial Accounting Standard No. 133. We are currently in the process of evaluating the effect this new standard will have on our financial statements. We do not believe the standard will have a material impact on our financial statements. 3. LONG-TERM DEBT Long-term debt consists of the following:
September 30, December 31, 2000 1999 ------------- ------------ Senior secured credit facility ................................. $ 95,000 $ - Revolving credit facility with MeriStar Hospitality Corporation.................................................... - 57,000 Other .......................................................... 264 762 -------- -------- 95,264 57,762 Less current portion ........................................... (80) (10) -------- -------- $ 95,184 $ 57,752 ======== ========
On February 29, 2000, we entered into a $100,000 senior secured credit facility with a syndicate of banks. The interest rate on the credit facility is the 30- day London Inter-Bank Offered Rate plus 350 basis points. The credit facility expires in February 2002 with a one-year extension at our option. On March 1, 2000, we borrowed $65,000 to repay the borrowings outstanding under the revolving credit agreement with MeriStar Hospitality Corporation. Upon execution of the senior secured credit facility, we amended the facility with MeriStar Hospitality Corporation to reduce the maximum borrowing limit from $75,000 to $50,000. 7 The aggregate future maturities of the above obligations are as follows: 2000..................................... $ 80 2001..................................... 184 2002..................................... - 2003..................................... 95,000 -------- $ 95,264 ======== 4. EARNINGS PER SHARE The following tables present the computation of basic and diluted earnings per share:
Three Months Ended Nine Months Ended September 30, September 30, ---------------------- ------------------------- 2000 1999 2000 1999 -------- -------- -------- -------- BASIC EARNINGS PER SHARE COMPUTATION: Net income $ (901) $ 1,553 $ 14,029 $ 9,898 Weighted average number of shares of common stock outstanding 35,882 29,043 33,547 27,298 -------- -------- -------- -------- Basic earnings per share $ (0.03) $ 0.05 $ 0.42 $ 0.36 ======== ======== ======== ======== DILUTED EARNINGS PER SHARE COMPUTATION: Net income $ (901) $ 1,553 14,029 $ 9,898 Minority interest, net of tax --- (30) 1,286 --- -------- -------- -------- -------- Adjusted net income $ (901) $ 1,523 $ 15,315 $ 9,898 ======== ======== ======== ======== Weighted average number of shares of common stock outstanding 35,882 29,043 33,547 27,298 Common stock equivalents-Operating partnership units --- 678 3,503 392 Common stock equivalents-stock options --- 186 82 160 ------- ------- ------- ------- Total weighted average number of diluted shares of common stock outstanding 35,882 29,907 37,132 27,850 ======== ======== ======== ======== Diluted earnings per share $ (0.03) $ 0.05 $ 0.41 $ 0.36 ======== ======== ======== ========
8 5. SUPPLEMENTAL CASH FLOW INFORMATION
Nine Months Ended September 30, ------------------ 2000 1999 -------- -------- Cash paid for interest and income taxes: Interest $ 4,337 $3,674 Income Taxes 420 35 Non-cash investing and financing activities: Conversion of operating partnership units to common stock 391 7,790 Operating partnership units issued and/or assumption of liabilities in purchase of intangible assets --- 6,736 Issuance of common stock to BridgeStreet shareholders 11,239 --- Fair value of assets acquired 17,223 --- Fair value of liabilities acquired (16,083) --- Fair value of debt assumed (12,021) --- -------- ------ Fair value of net liabilities assumed (10,881) --- ======== ======
6. SEGMENTS We are organized into four operating divisions: hotel operations, corporate housing, golf management and vacation ownership. Each division is managed separately because of its distinctive products and services. Hotel operations and corporate housing are reportable operating segments. In 1999, we were organized into three different operating segments: upscale, full-service hotels; premium limited-service hotels and inns; and resort properties. In 2000, we reorganized our operations into the current operating divisions. We reclassified the segment information for 1999 accordingly. We evaluate the performance of each division based on earnings before interest, taxes, depreciation, and amortization. The following are the segment disclosures for hotel operations and corporate housing for the three months ended September 30:
Hotel Operations Corporate Housing ---------------- ----------------- 2000 1999 2000 1999 ---- ---- ---- ---- Revenue $325,766 $314,344 $29,369 -- ======== ======== ======= ======== Earnings before interest, taxes, depreciation, and amortization $ 713 $ 5,656 $ 3,114 -- ======== ======== ======= ========
The following are the segment disclosures for hotel operations and corporate housing as of and for the nine months ended September 30:
Hotel Operations Corporate Housing ---------------- ----------------- 2000 1999 2000 1999 ---- ---- ---- ---- Revenue $1,026,825 $982,733 $38,761 -- ========== ======== ======= ======= Earnings before interest, taxes, depreciation, and amortization $ 32,848 $ 26,685 $ 3,898 -- ========== ======== ======= ======= Total assets $ 171,713 $136,558 $20,992 -- ========== ======== ======= =======
The following is a reconciliation of the segment information to our consolidated financial information for the three months ended September 30: 9
2000 1999 ------------------------------------- ------------------------------------- Earnings before interest, Earnings before interest, taxes, depreciation, and taxes, depreciation, and Revenues amortization Revenues amortization -------- ------------------------- -------- ------------------------- Hotel Operations $325,766 $ 713 $314,344 $5,656 Corporate Housing 29,369 3,114 -- -- Other 1,229 (47) 444 (487) -------- ------ -------- ------ Per financial statements $356,364 $3,780 $314,788 $5,169 ======== ====== ======== ======
The following is a reconciliation of the segment information to our consolidated financial information as of and for the nine months ended September 30:
2000 1999 --------------------------------------------- --------------------------------------------- Earnings before Earnings before interest, taxes, interest, taxes, depreciation, and depreciation, and Revenues amortization Assets Revenues amortization Assets -------- ------------------ ------ -------- ------------------ --------- Hotel Operations $1,026,825 $32,848 $171,713 $982,733 $26,685 $136,558 Corporate Housing 38,761 3,898 20,992 -- -- -- Other 3,962 (568) 182,094 3,116 (284) 140,008 ---------- ------- -------- -------- ------- -------- Per financial statements $1,069,548 $36,178 $374,799 $985,849 $26,401 $276,566 ========== ======= ======== ======== ======= ========
The other items in the tables above represent operating segment activity and assets for the non-reportable segments and non-operating segment activity and assets. The non-operating segment activity and assets are primarily unallocated corporate expenses and intangibles and other miscellaneous assets. Revenues for foreign operations for the three months ended September 30 were as follows: 2000 1999 ---- ---- Canada $8,717 $6,163 ====== ====== United Kingdom $7,040 $ --- ====== ====== Revenues for foreign operations for the nine months ended September 30 were as follows: 2000 1999 ---- ---- Canada $19,669 $16,345 ======= ======= United Kingdom $ 9,220 $ --- ======= ======= 10 7. ACQUISITION On May 31, 2000, we completed the acquisition of BridgeStreet Accommodations, Inc. for $1.50 in cash and 0.5 shares of our common stock for each share of BridgeStreet common stock outstanding. We issued 4,072 shares of common stock and paid $12,216 to BridgeStreet's shareholders. In addition, we repaid $12,021 of BridgeStreet's outstanding debt as part of the acquisition. BridgeStreet provides corporate housing services in the United States, Canada, and the United Kingdom. The total purchase price of the acquisition was approximately $44,907, which resulted in $34,335 of goodwill. The goodwill will be amortized on a straight line basis over 35 years. In accordance with generally accepted accounting principles, we accounted for the acquisition as a purchase. Accordingly, we have included the operating results of BridgeStreet in our condensed consolidated financial statements since May 31, 2000, the date of acquisition. The following unaudited pro forma consolidated results of operations are presented as if we had acquired BridgeStreet at the beginning of the periods presented:
Three Months Ended September 30, Nine Months Ended September 30, ------------------------------ ------------------------------- 2000 1999 2000 1999 ---- ---- ---- ---- Revenue $356,364 $340,921 $1,110,500 $1,058,908 Net Income $ (901) $ 1,765 $ 12,112 $ 9,577 Earnings Per Share: Basic $ (0.03) $ 0.05 $ 0.33 $ 0.31 Diluted $ (0.03) $ 0.05 $ 0.33 $ 0.31
The pro forma consolidated results of operations include adjustments to give effect to amortization of goodwill, interest expense on acquisition debt and certain other adjustments, together with related income tax effects. The unaudited pro forma information is not necessarily indicative of the results of operations that would have occurred had the purchase been made at the beginning of the periods presented or the future results of the combined operations. 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL We lease, manage and operate a portfolio of hospitality properties and provide related services in the hotel, corporate housing, golf, and vacation membership markets. Our portfolio is diversified by franchise and brand affiliations. Our subsidiary, MeriStar H&R Operating Company, L.P., conducts all of our operations. We are the sole general partner of MeriStar H&R and control its operations. On August 3, 1998, American General Hospitality Corporation and CapStar Hotel Company merged together to form MeriStar Hospitality Corporation, a real estate investment trust. As part of that merger, CapStar formed our company to become the lessee, manager and operator of substantially all of the hotels owned or leased by American General and CapStar before the merger. At the time of the merger, CapStar distributed all of the shares of our common stock to its stockholders and we became a separate, publicly traded company. We manage all of the hotels CapStar leased and/or managed for third-party owners before the merger. Immediately after the merger, we acquired all of the partnership interests in AGH Leasing, L.P., the third-party lessee that leased most of the hotels American General owned. We also acquired substantially all of the assets and some liabilities of American General Hospitality, Inc., the third-party manager that managed most of the hotels American General owned. As of September 30, 2000, we leased or managed 213 hotels with 46,511 rooms in 33 states, the District of Columbia, Canada, Puerto Rico, and the U.S. Virgin Islands. We also manage or are otherwise affiliated with 11 golf courses. Our golf course management operations are not material to any period presented. On May 31, 2000, we completed the acquisition of BridgeStreet Accommodations, Inc. for $1.50 in cash and 0.5 shares of our common stock for each share of BridgeStreet common stock outstanding. In addition, we repaid $12.0 million of BridgeStreet's outstanding debt as part of the acquisition. BridgeStreet provides corporate housing services in the United States, Canada, and the United Kingdom. The total purchase price of the acquisition was approximately $44.9 million. As of September 30, 2000, BridgeStreet had approximately 3,600 apartments under lease in the United States, Canada, and the United Kingdom. In December 1999, the Real Estate Investment Trust Modernization Act became law. The Real Estate Investment Trust Modernization Act now permits real estate investment trusts to create a taxable subsidiary on or after January 1, 2000, which will be subject to taxation similar to a C-Corporation. In conjunction with the REIT Modernization Act, we have agreed to convert all 106 leases with MeriStar Hospitality to management contracts beginning January 1, 2001. We have structured the management agreements to mirror the current economics and terms of the existing leases. The conversion does not result in any cash consideration to be exchanged between the parties. Under the new management agreements, the base management fee is 2.5 percent of total hotel revenue with incentives up to an additional 1.5 percent of total revenue if we achieve certain operating thresholds. We are also in discussions with our other primary lessor, Winston Hotels, Inc., regarding the conversion of our 47 leases with Winston to management contracts. We have not yet reached an agreement with Winston regarding conversion of these leases. Financial Condition Assets - ------ Our total assets increased by $116.7 million to $374.8 million at September 30, 2000 from $258.1 million at December 31, 1999 primarily due to the following: . Investments in and advances to affiliates increased by $8.0 million due to our investments in MIP Lessee, L.P. and other hotel ventures; . Accounts receivable increased $29.3 million primarily due to: . An increase of $50.1 million in our revenues in the third quarter of 2000 compared to the fourth quarter of 1999; and . The addition of $5.4 million of BridgeStreet's accounts receivable. . Cash and cash equivalents increased $8.3 million resulting from net operating activity and additional net borrowings on our credit facility; 12 . Prepaid expenses increased $18.3 million due to: . The addition of $6.9 million of BridgeStreet prepaid expenses; and . The establishment of a $9.9 million prepaid lease expense under Emerging Issues Task Force Issue No. 98-9. This prepaid balance only exists at interim periods. . Furniture, fixtures, and equipment increased $12.7 million during the nine months ended September 30, 2000 primarily due to the acquisition of BridgeStreet and the acquisition of computer equipment and software. As of September 30, 2000 BridgeStreet has $7.2 million of furniture, fixtures, and equipment; and . Intangible assets increased $36.5 million primarily due to the acquisition of BridgeStreet. Our assets include a substantial amount of intangible assets, primarily related to our acquisitions of hotel management companies and BridgeStreet. We evaluate the carrying values of our long-lived intangible assets periodically in relation to their operating performance and expected future undiscounted cash flows of the underlying assets. Through September 30, 2000, our evaluations have not indicated a need to adjust the carrying value of our intangible assets. Over the past two years, however, the lodging industry has experienced the negative effects of the supply of new rooms in some hotel product types and geographic regions exceeding demand. As a result, we will continue to regularly evaluate the recoverability of our intangible assets. Liabilities - ----------- Our total liabilities increased by $85.0 million to $264.2 million at September 30, 2000 from $179.2 million at December 31, 1999 primarily due to the following: . Accounts payable, accrued expenses and other liabilities increased $28.3 million due to: . Higher operating expenses before participating lease expense for the third quarter 2000 as compared to the fourth quarter 1999; and . The addition of $10.5 million of BridgeStreet's accounts payable, accrued expenses and other liabilities. . Due to MeriStar Hospitality Corporation increased $9.1 million primarily due to the participating rent payable balance at September 30, 2000 being higher than at December 31, 1999; and . Long-term debt increased $37.4 million due to borrowings under our credit facility to fund short term operating requirements and the acquisition of BridgeStreet. Stockholders' Equity - -------------------- Stockholders' equity increased $31.1 million primarily due to: . The issuance of 4,072,099 shares of our common stock to BridgeStreet's shareholders; . The sale of 1,818,182 shares of our common stock to our joint venture partner in MIP Lessee, L.P.; and . Net income of $14.0 million through September 2000. Results of Operations Three Months Ended September 30, 2000 Compared to Three Months Ended September 30, 1999 Revenues - --------- Total revenue increased $41.6 million or 13.2% to $356.4 million in the three months ended September 30, 2000 compared to $314.8 million in the three months ended September 30, 1999. The increase in revenue is primarily the result of the acquisition of BridgeStreet, an increase in third-party management fees, and a 5.2% improvement in revenue per available room from our leased hotels. The improvement in revenue per available room was primarily the result of a 6.7% increase in the average daily rate. The following table provides our operating statistics for our leased hotels on a pro forma basis for the quarter: 2000 1999 Change ---- ---- ------ Revenue per available room $72.69 $69.09 5.2 % Average daily rate $99.09 $92.85 6.7 % Occupancy 73.4% 74.4% (1.3)% 13 Operating Expenses - ------------------ Operating expenses increased $44.4 million or 14.3% to $355.4 million in the three months ended September 30, 2000 compared to $311.0 million in the three months ended September 30, 1999. This increase reflects: . The acquisition of BridgeStreet; . Increased participating lease expense resulting from the increase in revenue at our leased hotels; and . Increased administrative and general expenses due mainly to higher insurance costs and labor costs. Earnings Before Interest, Taxes, Depreciation and Amortization - -------------------------------------------------------------- Earnings before interest, taxes, depreciation and amortization decreased to $3.8 million in the three months ended September 30, 2000 compared to $5.2 million in the three months ended September 30, 1999. The decrease in earnings before interest, taxes, depreciation and amortization is primarily due to: . A $4.9 million decrease in hotel operations' earnings before interest, taxes, depreciation and amortization resulting from increased cost pressures. These include higher lease expenses, energy costs, insurance costs, frequent traveler program costs, and labor costs; and . The acquisition of BridgeStreet resulted in $3.1 million of earnings before interest, taxes, depreciation and amortization. Minority interest decreased by $0.3 million primarily due to lower operating income as compared to 1999. Taxes decreased by $1.0 million due to lower operating income as compared to 1999. Nine Months Ended September 30, 2000 Compared to Nine Months Ended September 30, 1999 Revenues - --------- Total revenue increased $83.7 million or 8.5% to $1,069.5 million in the nine months ended September 30, 2000 compared to $985.8 million in the nine months ended September 30, 1999. The increase in revenue is primarily the result of an increase in the number of third party managed hotels, the acquisition of BridgeStreet, and a 4.9% improvement in revenue per available room from our leased hotels. The improvement in revenue per available room was primarily the result of a 5.6% increase in the average daily rate. The following table provides our operating statistics for our leased hotels on a pro forma basis: 2000 1999 Change ---- ---- ------ Revenue per available room $ 75.66 $72.14 4.9 % Average daily rate $102.99 $97.49 5.6 % Occupancy 73.5% 74.0% (0.7)% Operating Expenses - ------------------ Operating expenses increased $76.0 million or 7.9% to $1,039.9 million in the nine months ended September 30, 2000 compared to $963.9 million in the nine months ended September 30, 1999. The increase reflects: . The acquisition of BridgeStreet; . The increased departmental operating costs and participating lease expense of our leased hotels associated with the increase in revenue; and . Increased administrative and general expenses due to higher insurance costs and labor costs. Earnings Before Interest, Taxes, Depreciation and Amortization - -------------------------------------------------------------- Earnings before interest, taxes, depreciation and amortization increased to $36.2 million in the nine months ended September 30, 2000 compared to $26.4 million in the nine months ended September 30, 1999. The increase in earnings before interest, taxes, depreciation and amortization is primarily due to: . A $6.2 million increase in hotel operations; and . $3.9 million from BridgeStreet's operations. Minority interest decrease by $0.6 million primarily due to the conversion of operating partnership units. Taxes increased by $3.2 million due to higher operating income as compared to 1999. 14 Emerging Issues Task Force Issue No. 98-9, "Accounting for Contingent Rent in Interim Financial Periods," requires a lessee to recognize contingent rental expense for interim periods prior to the achievement of the specified target that triggers the contingent rental expense, if the achievement of that target by the end of the fiscal year is considered probable. This accounting pronouncement relates only to our recognition of lease expense in interim periods for financial reporting purposes; it has no effect on the timing of rent payments under our leases or our annual lease expense calculations. We made cash lease payments in excess of the expense we were required to recognize under EITF No. 98-9 during the interim periods ended September 30, 2000 and 1999. As of September 30, 2000 and 1999, this resulted in prepaid expense balances of $9,910 and $6,345, respectively, which are included on our condensed consolidated balance sheets. The effect on our financial statements is as follows (in thousands, except for per share amounts):
Three Months Ended September 30, 2000 ------------------------------------- Prior to Effect Effect After Effect of of of EITF No. 98-9 EITF No. 98-9 EITF No. 98-9 ---------------- -------------- -------------- Net operating income $ 1,218 (216) $ 1,002 Interest expense, net (1,986) -- (1,986) Minority interest 57 (26) 31 Income taxes 291 (239) 52 ------- ----- ------- Net income $ (420) $(481) $ (901) ======= ===== ======= Diluted earnings per share $ (0.01) $(0.03) ======= =======
Three Months Ended September 30, 1999 ------------------------------------- Prior to Effect Effect After Effect of of of EITF No. 98-9 EITF No. 98-9 EITF No. 98-9 ---------------- -------------- -------------- Net operating income $ 306 $ 3,445 $ 3,751 Interest expense, net (1,037) --- (1,037) Minority interest 205 (455) (250) Income taxes 195 (1,106) (911) ------- ------- ------- Net income $ (331) $ 1,884 $ 1,553 ======= ======= ======= Diluted earnings per share $ (0.01) $ 0.05 ======= ======= Nine Months Ended September 30, 2000 ------------------------------------ Prior to Effect Effect After Effect of of of EITF No. 98-9 EITF No. 98-9 EITF No. 98-9 ---------------- -------------- -------------- Net operating income $19,728 $ 9,910 $29,638 Interest expense, net (4,530) -- (4,530) Minority interest (1,266) (842) (2,108) Income taxes (5,236) (3,735) (8,971) ------- ------- ------- Net income $ 8,696 $ 5,333 $14,029 ======= ======= ======= Diluted earnings per share $ 0.26 $ 0.41 ======= =======
15
Nine Months Ended September 30, 1999 ------------------------------------ Prior to Effect Effect After Effect of of of EITF No. 98-9 EITF No. 98-9 EITF No. 98-9 ---------------- -------------- -------------- Net operating income $15,602 $ 6,345 $21,947 Interest expense, net (3,543) --- (3,543) Minority interest (1,864) (830) (2,694) Income taxes (3,772) (2,040) (5,812) ------- ------- ------- Net income $ 6,423 $ 3,475 $ 9,898 ======= ======= ======= Diluted earnings per share $ 0.23 $0.36 ======= =======
Liquidity and Capital Resources Sources of Cash Our continuing operations are funded through cash generated from hotel management and leasing operations, and corporate housing operations. We finance business acquisitions and investments in affiliates through a combination of internally generated cash, external borrowings and the issuance of partnership interests and/or common stock. We generated $9.8 million of cash from operations during the first nine months of 2000. We generated $28.1 million of cash from financing activities during the first nine months of 2000 primarily from the following: . We had net borrowings of $37.4 million on our credit facilities; . We repaid $12.0 million of the BridgeStreet debt as part of our acquisition of BridgeStreet; and . We received $5.5 million from the issuances of our common stock. Under the terms of the participating lease agreements with our lessors, our lessors will generally be required to fund significant capital expenditures at the hotels we lease. Uses of Cash We used $29.8 million of cash in investing activities during the first nine months of 2000 primarily for the following: . We purchased $7.1 million of fixed assets; . We invested $8.0 million in hotel partnerships; and . We paid $12.2 million in cash to BridgeStreet shareholders during the acquisition. Revolving Credit Facilities On February 29, 2000, we entered into a $100.0 million senior secured revolving credit facility with a syndicate of banks. This facility has an interest rate of the 30-day London Inter-Bank Offered Rate plus 350 basis points and expires in February 2002 with an optional one-year extension. We borrowed $65 million to repay the borrowings outstanding under the revolving credit agreement with MeriStar Hospitality Corporation. At September 30, 2000, we had $5.0 million of unused capacity under the senior secured revolving credit facility. We amended the facility with MeriStar Hospitality Corporation to reduce the maximum borrowing limit from $75 million to $50 million when we entered into this new facility. Summary We believe cash generated by our operations, together with anticipated borrowing capacity under our credit facilities, will be sufficient to fund our requirements for working capital, capital expenditures, and debt service. We expect to continue to seek acquisitions of hotel, resort and golf management businesses and management contracts. In addition, we expect to expand our corporate housing business by entering new markets. We also expect to expand our business into vacation ownership management. We expect to finance future acquisitions through a combination of additional borrowings under 16 our credit facilities and the issuance of operating partnership units and/or our common stock. We believe these sources of capital will be sufficient to provide for our long-term capital needs. Seasonality Demand in the lodging industry is affected by recurring seasonal patterns. For non-resort properties, demand is lower in the winter months due to decreased travel and higher in the spring and summer months during peak travel season. For resort properties, demand is generally higher in winter and early spring. Since the majority of our hotels are non-resort properties, our operations generally reflect non-resort seasonality patterns. Excluding the effect of Emerging Issues Task Force Issue No. 98-9, "Accounting for Contingent Rent in Interim Financial Periods", we have lower revenue, operating income and cash flow in the first and fourth quarters and higher revenue, operating income and cash flow in the second and third quarters. Corporate housing activity peaks in the summer months and declines during the fourth quarter and the first part of the first quarter. We expect to have lower revenue, operating income and cash flow from corporate housing in the first and fourth quarters. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes since the Company filed the Form 10-Q on August 10, 2000. 17 PART II. OTHER INFORMATION ITEM 5. OTHER INFORMATION Forward-Looking Statements Certain statements in this Form 10-Q and in the future filings by the Company with the SEC, in the Company's press releases, and in oral statements made by or with the approval of an authorized executive officer constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievement expressed or implied by such forward-looking statements. Such factors include: the ability of the Company to successfully implement its operating strategy; the Company's ability to manage expansion; lease rental rates; changes in economic cycles; competition from other hospitality companies; the ability of the REIT to acquire properties which will be leased to the Company; the availability of financing to the Company and to the REIT; and changes in the laws and governmental regulations applicable to the relationship between the REIT and the Company. ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. 10.1 Form of Employment Agreement between the Company and Paul W. Whetsell 10.14 Form of Employment Agreement between the Company and John Emery 27 -- Financial Data Schedule Current Report on Form 8-K dated and filed on March 24, 2000, regarding the merger of MeriStar Hotels & Resorts, Inc. with BridgeStreet Accommodations, Inc. 18 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MeriStar Hotels & Resorts, Inc. Dated: November 13, 2000 /s/ James A. Calder ----------------------- James A. Calder Chief Financial Officer 19 EX-10.1 2 0002.txt EXHIBIT 10.1 EXECUTION COPY EXECUTIVE EMPLOYMENT AGREEMENT EXECUTIVE EMPLOYMENT AGREEMENT, effective as of April 1, 2000 by and between MERISTAR HOTELS & RESORTS, INC., a Delaware corporation (the "Company"), MERISTAR MANAGEMENT COMPANY, LLC, a Delaware limited liability company (the "LLC"), and PAUL W. WHETSELL (the "Executive"), an individual residing at 10901 Tara Road, Potomac, Maryland 20854. The Company and the LLC desire to employ the Executive in the capacities of Chairman of the Board and Chief Executive Officer, and the Executive desires to be so employed, on the terms and subject to the conditions set forth in this agreement (the "Agreement"); Now, therefore, in consideration of the mutual covenants set forth herein and other good and valuable consideration the parties hereto hereby agree as follows: 1. Employment Term. The Company and the LLC each hereby employ the --------------- Executive, and the Executive agrees to be employed by the Company and the LLC, upon the terms and subject to the conditions set forth herein, for a term of three and one-half (3 1/2) years, commencing on April 1, 2000 (the "Commencement Date"), unless terminated earlier in accordance with Section 5 of this Agreement; provided that such term shall automatically be extended from time to -------- time for additional periods of one calendar year from the date on which it would otherwise expire unless the Executive, on one hand, or the Company and the LLC, on the other, gives notice to the other party or parties not less than 120 days prior to such date that it elects to permit the term of this Agreement to expire without extension on such date. (The initial term of this Agreement as the same may be extended in accordance with the terms of this Agreement is hereinafter referred to as the "Term"). 2. Positions: Conduct. ------------------ (a) During the Term, the Executive will hold the titles and offices of, and serve in the positions of, Chairman of the Board and Chief Executive Officer of the Company and the LLC. The Executive shall report to the Board of Directors of the Company (the "Board") and shall perform such specific duties and services (including service as an officer, director or equivalent position of any direct or indirect subsidiary without additional compensation) as they shall reasonably request consistent with the Executive's positions. (b) During the Term, the Executive agrees to devote his full business time and attention to the business and affairs of the Company and the LLC and to faithfully and diligently perform, to the best of his ability, all of his duties and responsibilities hereunder, provided, that the Executive may -------- devote his business time to providing services to MeriStar Hospitality Corporation, and may provide services as described in Schedule A attached hereto, so long as such activity does not interfere with the performance of the Executive's duties hereunder. Nothing in this Agreement shall preclude the Executive from devoting reasonable time and attention to (i) serving, with the approval of the Board, as a g director, trustee or member of any committee of any organization, (ii) engaging in charitable and community activities and (iii) managing his personal investments and affairs; provided that such activities do not involve any material conflict -------- of interest with the interests of the Company or, individually or collectively, interfere materially with the performance by the Executive of his duties and responsibilities under this Agreement. Notwithstanding the foregoing and except as expressly provided herein, during the Term, the Executive may not accept employment with any other individual or entity, or engage in any other venture which is directly or indirectly in conflict or competition with the business of the Company or the LLC. (c) The Executive's office and place of rendering his services under this Agreement shall be in the principal executive offices of the Company which shall be in the Washington, D.C. metropolitan area. Under no circumstances shall the Executive be required to relocate from the Washington, D.C. metropolitan area or provide services under this Agreement in any other location other than in connection with reasonable and customary business travel. During the Term, the Company shall provide the Executive with executive office space, and administrative and secretarial assistance and other support services consistent with his position as Chairman of the Board and Chief Executive Officer and with his duties and responsibilities hereunder. 3. Board of Directors. While it is understood that the right to ------------------ elect directors of the Company is by law vested in the stockholders and directors of the Company, it is nevertheless mutually contemplated that, subject to such rights, during the Term the Executive will serve as a member of the Company's Board of Directors. 4. Salary; Additional Compensation; Perquisites and Benefits. --------------------------------------------------------- (a) During the Term, the Company and the LLC will pay the Executive a base salary at an aggregate annual rate of not less than $190,000 per annum, subject to annual review by the Compensation Committee of the Board (the "Compensation Committee"), and in the discretion of such Committee, increased from time to time. Once increased, such base salary may not be decreased. Such salary shall be paid in periodic installments in accordance with the Company's standard practice, but not less frequently than semi-monthly. (b) For each fiscal year during the Term, the Executive will be eligible to receive a bonus from the Company. The award and amount of such bonus shall be based upon the achievement of predefined operating or performance goals and other criteria established by the Compensation Committee, which goals shall give the Executive the opportunity to earn a bonus in the following amounts: threshold 2 target - 25% of base salary; target - 125% of base salary; and maximum bonus amount - 150% of base salary. (c) During the Term, the Executive will participate in all plans now existing or hereafter adopted by the Company or the LLC for their management employees or the general benefit of their employees, such as any pension, profit-sharing, bonuses, stock option or other incentive compensation plans, life and health insurance plans, or other insurance plans and benefits on the same basis and subject to the same qualifications as other senior executive officers. (d) (i) The Executive shall be eligible for stock option grants from time to time pursuant to the Company's Incentive Plan in accordance with the terms thereof. (ii) In connection with the spin-off of the Company from CapStar Hotel Company, the Executive received options to purchase 250,000 shares of common stock of the Company (the "Pre-Spinoff Awards"). (e) The Company and the LLC will reimburse the Executive, in accordance with their standard policies from time to time in effect, for all out-of-pocket business expenses as may be incurred by the Executive in the performance of his duties under this Agreement. (f) The Executive shall be entitled to vacation time to be credited and taken in accordance with the Company's policy from time to time in effect for senior executives, which in any event shall not be less than a total of four weeks per calendar year. (g) The Company, at its sole cost, shall provide the Executive with a life insurance policy with a death benefit of at least $2,000,000 payable to a beneficiary designated by the Executive and a disability policy which, upon a determination of the Executive's Disability (as hereinafter defined), pays at least $2,000,000 to the Executive. (h) The Executive shall be granted a car allowance of up to $1000 per month for the lease of an automobile to be leased by the Company for the use of the Executive. (i) To the fullest extent permitted by applicable law, the Executive shall be indemnified and held harmless by the Company and the LLC against any and all judgments, penalties, fines, amounts paid in settlement, and other reasonable expenses (including, without limitation, reasonable attorneys' fees and disbursements) actually incurred by the Executive in connection with any threatened, pending or completed action, suit or proceeding (whether civil, criminal, administrative, 3 investigative or other) for any action or omission in his capacity as a director, officer or employee of the Company or the LLC. Indemnification under this Section 4(j) shall be in addition to, and not in substitution of, any other indemnification by the Company or the LLC of its officers and directors. Expenses incurred by the Executive in defending an action, suit or proceeding for which he claims the right to be indemnified pursuant to this Section 4(j) shall be paid by the Company or the LLC, as the case may be, in advance of the final disposition of such action, suit or proceeding upon the Company's or the LLC's receipt of (x) a written affirmation by the Executive of his good faith belief that the standard of conduct necessary for his indemnification hereunder and under the provisions of applicable law has been met and (y) a written undertaking by or on behalf of the Executive to repay the amount advanced if it shall ultimately be determined by a court that the Executive engaged in conduct which precludes indemnification under the provisions of such applicable law. Such written undertaking in clause (y) shall be accepted by the Company or the LLC, as the case may be, without security therefor and without reference to the financial ability of the Executive to make repayment thereunder. The Company and the LLC shall use commercially reasonable efforts to maintain in effect for the Term of this Agreement a directors' and officers' liability insurance policy, with a policy limit of at least $5,000,000, subject to customary exclusions, with respect to claims made against officers and directors of the Company or the LLC; provided, however , the -------- ------- Company or the LLC, as the case may be, shall be relieved of this obligation to maintain directors' and officers' liability insurance if, in the good faith judgment of the Company or the LLC, it cannot be obtained at a reasonable cost. 5. Termination. ----------- (a) The Term will terminate immediately upon the Executive's death or, upon thirty (30) days' prior written notice by the Company, in the case of a determination of the Executive's Disability. As used herein the term "Disability" means the Executive's inability to perform his duties and responsibilities under this Agreement for a period of more than 120 consecutive days, or for more than 180 days, whether or not continuous, during any 365-day period, due to physical or mental incapacity or impairment. A determination of Disability will be made by a physician reasonably satisfactory to both the Executive and the Company and paid for by the Company or the LLC whose decision shall be final and binding on the Executive and the Company; provided that if -------- they cannot agree as to a physician, then each shall select and pay for a physician and these two together shall select a third physician whose fee shall be borne equally by the Executive and either the Company or the LLC and whose determination of Disability shall be binding on the Executive and the Company. Should the Executive become incapacitated, his employment shall continue and all base and other compensation due the Executive hereunder shall continue to be paid through the date upon which the Executive's employment is terminated for Disability in accordance with this section. 4 (b) The Term may be terminated by the Company upon notice to the Executive upon the occurrence of any event constituting "Cause" as defined herein. (c) The Term may be terminated by the Executive upon notice to the Company of any event constituting "Good Reason" as defined herein. 6. Severance. --------- (a) If the Term is terminated by the Company for Cause, the Company and the LLC will pay to the Executive an aggregate amount equal to the Executive's accrued and unpaid base salary through the date of such termination, and all unvested options will terminate immediately and any vested options issued pursuant to the Company's Incentive Plan and held by the Executive at termination, will expire ninety (90) days after the termination date. (b) If the Term is terminated by the Executive other than because of death, Disability or for Good Reason, the Company and the LLC will pay to the Executive an aggregate amount equal to the Executive's accrued and unpaid base salary through the date of such termination, and all unvested options will terminate immediately and any vested options issued pursuant to the Company's Incentive Plan and held by the Executive at termination, will expire ninety (90) days after the termination date. (c) If the Term is terminated upon the Executive's death or Disability, the Company and the LLC will pay to the Executive's estate or the Executive, as the case may be, a lump sum payment equal to the Executive's base salary through the termination date, plus a pro rata portion of the Executive's bonus for the fiscal year in which the termination occurred. In addition, the Company will make payments for one (1) year of all compensation otherwise payable to the Executive pursuant to this Agreement, including, but not limited to, base salary, bonus and welfare benefits. In addition, all of the Executive's unvested stock options and restricted stock awards will immediately vest and become exercisable for a period of one (1) year thereafter and shares of restricted stock of the Company previously granted to the Executive shall become free from all contractual restrictions. (d) Subject to Section 6(e) hereof, if the Term is terminated by the Company without Cause or other than by reason of his death or Disability, in addition to any other remedies available, or if the Executive terminates the Term for Good Reason, the Company and the LLC shall pay the Executive a lump sum equal to the product of (x) the sum of (A) the Executive's then annual base salary and (B) the amount of the Executive's bonus for the preceding year, multiplied by (y) the greater of (A) two and one-half (2 1/2) and (B) a fraction, the numerator of which is the number of days remaining in the Term (without further extension) and the denominator of which is 365. In addition, all of the Executive's unvested stock options and restricted stock awards will immediately vest and become exercisable for a period of one (1) year thereafter and shares of restricted 5 stock of the Company previously granted to the Executive shall become free from all contractual restrictions, and the Company shall continue in effect the Executive's benefits under Section 4(g) hereof and the Executive's health benefits noted in Section 4(c) hereof or their equivalent for a period equal to the greater of two and one-half (2 1/2) years or the remaining Term, without further extension. (e) If, within twenty-four (24) months following a Change in Control, the Term is terminated by the Executive for Good Reason or by the Company without Cause, in addition to any other rights which the Executive may have under law or otherwise, the Executive shall receive the same payments and benefits provided for under Section 6(d) hereof; provided, that the amount of -------- the multiplier described in clause (d)(y)(A) of Section 6 hereof shall be increased from two and one-half (2 1/2) times to three and one-half (3 1/2) times. (f) If at any time the Term is not extended pursuant to the proviso to Section 1 hereof as a result of the Company giving notice thereunder that it elects to permit the term of this Agreement to expire without extension, the Company shall be deemed to have terminated the Executive's employment without Cause. (g) Notwithstanding anything in this Section 6 to the contrary, if the Term is terminated for any reason, at any time prior to the first anniversary of the Commencement Date, the Pre-Spinoff Awards will immediately vest and remain exercisable in accordance with their respective terms; provided, -------- however, such Pre-Spinoff Awards will have an exercise period of at least - ------- one-year from the date of termination. (h) As used herein, the term "Cause" means: (i) the Executive's willful and intentional failure or refusal to perform or observe any of his material duties, responsibilities or obligations set forth in this Agreement; provided, however, that the -------- ------- Company shall not be deemed to have Cause pursuant to this clause (i) unless the Company gives the Executive written notice that the specified conduct has occurred and making specific reference to this Section 6(h)(i) and the Executive fails to cure the conduct within thirty (30) days after receipt of such notice; (ii) any willful and intentional act of the Executive involving malfeasance, fraud, theft, misappropriation of funds, embezzlement or dishonesty affecting the Company or the LLC; or (iii) the Executive's conviction of, or a plea of guilty or nolo contendere to, an offense which is a felony in the jurisdiction involved. Termination of the Executive for Cause shall be communicated by a Notice of Termination. For purposes of this Agreement, a "Notice of Termination" shall mean 6 delivery to the Executive of a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the entire membership of the Company's Board at a meeting of the Board called and held for the purpose (after reasonable notice to the Executive and reasonable opportunity for the Executive, together with the Executive's counsel, to be heard before the Board prior to such vote) of finding that in the good faith opinion of the Board, the Executive was guilty of conduct constituting Cause and specifying the particulars thereof in detail, including, with respect to any termination based upon conduct described in clause (i) above that the Executive failed to cure such conduct during the thirty-day period following the date on which the Company gave written notice of the conduct referred to in such clause (i). For purposes of this Agreement, no such purported termination of the Executive's employment shall be effective without such Notice of Termination; (i) As used herein, the term "Good Reason" means the occurrence of any of the following, without the prior written consent of the Executive: (i) assignment of the Executive of duties materially inconsistent with the Executive's positions as described in Section 2(a) hereof, or any significant diminution in the Executive's duties or responsibilities, other than in connection with the termination of the Executive's employment for Cause, Disability or as a result of the Executive's death or by the Executive other than for Good Reason; (ii) the failure of the Company to nominate the Executive to the Board or the failure of the Executive to be elected to the Board, (iii) the change in the location of the Company's principal executive offices or of the Executive's principal place of employment to a location outside the Washington, D.C. metropolitan area; (iv) any material breach of this Agreement by the Company or the LLC which is continuing; or (v) a Change in Control; provided, however, that the Executive shall not be deemed to have Good Reason - -------- ------- pursuant to clauses (i), (ii) or (iv) above unless the Executive gives the Company or the LLC, as the case may be, written notice that the specified conduct or event has occurred and the Company or the LLC fails to cure such conduct or event within thirty (30) days of the receipt of such notice. (j) As used herein, the term "Change in Control" means the occurrence of any one of the following events: 7 (i) the acquisition (other than from the Company) by any "Person" (as the term is used for purposes of Sections 13(d) or 14(d) of the Exchange Act) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty (30%) percent or more of the combined voting power of the Company's then outstanding voting securities; or (ii) the individuals who were members of the Board (the "Incumbent Board") during the previous twelve (12) month period, cease for any reason to constitute at least a majority of the Board; provided, -------- however, that if the election, or nomination for election by the Company's ------- stockholders, of any new director was approved by a vote of at least two- thirds of the Incumbent Board, such new director shall, for purposes of this Agreement, be considered as a member of the Incumbent Board; (iii) approval by the stockholders of the Company of (a) merger or consolidation involving the Company if the stockholders of the Company, immediately before such merger or consolidation do not, as a result of such merger or consolidation, own, directly or indirectly, more than fifty (50%) percent of the combined voting power of the then outstanding voting securities of the corporation resulting from such merger or consolidation in substantially the same proportion as their ownership of the combined voting power of the voting securities of the Company outstanding immediately before such merger or consolidation or (b) a complete liquidation or dissolution of the Company or an agreement for the sale or other disposition of all or substantially all of the assets of the Company; or (iv) approval by the stockholders of the Company of any transaction (including without limitation a "going private transaction") involving the Company if the stockholders of the Company, immediately before such transaction, do not as a result of such transaction, own directly or indirectly, more than fifty (50%) percent of the combined voting power of the then outstanding voting securities of the corporation resulting from such transaction in substantially the same proportion as their ownership of the combined voting power of the voting securities of the Company outstanding immediately before such transaction. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur pursuant to clause (i) above solely because thirty (30%) percent or more of the combined voting power of the Company's then outstanding securities is acquired by (a) a trustee or other fiduciary holding securities under one or more employee benefit plans maintained by the Company or any of its subsidiaries or (b) any corporation which, immediately prior to such acquisition, is owned directly or indirectly by the stockholders of the Company in the same proportion as their ownership of stock in the Company immediately prior to such acquisition. 8 (k) The amounts required to be paid and the benefits required to be made available to the Executive under this Section 6 are absolute. Under no circumstances shall the Executive, upon the termination of his employment hereunder, be required to seek alternative employment and, in the event that the Executive does secure other employment, no compensation or other benefits received in respect of such employment shall be set-off or in any other way limit or reduce the obligations of the Company under this Section 6. (l) Excise Tax Payments. ------------------- (i) Gross-Up Payment. If it shall be determined that any ---------------- payment or distribution of any type to or in respect of the Executive, by the Company, the LLC, or any other person, whether paid or payable or distributed or distributable pursuant to the terms of the Agreement or otherwise (the "Total Payments"), is or will be subject to the excise tax imposed by Section 4999 of the Internal Code of 1986, as amended (the "Code") or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes) imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Total Payments. (ii) Determination by Accountant. --------------------------- (A) All computations and determinations relevant to this Section 6(l) shall be made by a national accounting firm selected by the Company from among the five (5) largest accounting firms in the United States (the "Accounting Firm") which firm may be the Company's accountants. Such determinations shall include whether any of the Total Payments are "parachute payments" (within the meaning of Section 280G of the Code). In making the initial determination hereunder as to whether a Gross-Up Payment is required the Accounting Firm shall determine that no Gross-Up Payment is required, if the Accounting Firm is able to conclude that no "Change of Control" has occurred (within the meaning of Section 280G of the Code) on the basis of "substantial authority" (within the meaning of Section 6230 of the Code) and shall provide opinions to that effect to both the Company and the Executive. If the Accounting Firm determines that a Gross-Up Payment is required, the Accounting Firm shall provide its determination (the "Determination"), together with detailed supporting calculations regarding the amount of any Gross-Up Payment and any other relevant matter both to the Company and the Executive by no later than ten (10) days following the Termination Date, if applicable, or such earlier time as is requested by the Company or the Executive (if the Executive reasonably believes that any of the Total Payments may be subject to the Excise 9 Tax). If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall furnish the Executive and the Company with a written statement that such Accounting Firm has concluded that no Excise Tax is payable (including the reasons therefor) and that the Executive has substantial authority not to report any Excise Tax on his federal income tax return. (B) If a Gross-Up Payment is determined to be payable, it shall be paid to the Executive within twenty (20) days after the Determination (and all accompanying calculations and other material supporting the Determination) is delivered to the Company by the Accounting Firm. Any determination by the Accounting Firm shall be binding upon the Company and the Executive, absent manifest error. (C) As a result of uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments not made by the Company should have been made ("Underpayment"), or that Gross-Up Payments will have been made by the Company which should not have been made ("Overpayments"). In either such event, the Accounting Firm shall determine the amount of the Underpayment or Overpayment that has occurred. In the case of an Underpayment, the amount of such Underpayment (together with any interest and penalties payable by the Executive as a result of such Underpayment) shall be promptly paid by the Company to or for the benefit of the Executive. (D) In the case of an Overpayment, the Executive shall, at the direction and expense of the Company, take such steps as are reasonably necessary (including the filing of returns and claims for refund), follow reasonable instructions from, and procedures established by, the Company, and otherwise reasonably cooperate with the Company to correct such Overpayment, provided, however, that (i) the Executive shall not in any event be obligated to return to the Company an amount greater than the net after-tax portion of the Overpayment that he has retained or has recovered as a refund from the applicable taxing authorities and (ii) this provision shall be interpreted in a manner consistent with the intent of Section 6(l)(i), which is to make the Executive whole, on an after-tax basis, from the application of the Excise Taxes, it being acknowledged and understood that the correction of an Overpayment may result in the Executive repaying to the Company an amount which is less than the Overpayment. (E) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service relating to the possible application of the Excise Tax under Section 4999 of the Code to any of the payments and amounts referred to herein and shall afford the Company, at its expense, the opportunity to control the defense of such claim. 10 7. Confidential Information. ------------------------ (a) The Executive acknowledges that the Company and its subsidiaries or affiliated ventures ("Company Affiliates") own and have developed and compile, and will in the future own, develop and compile certain Confidential Information and that during the course of his rendering services hereunder Confidential Information will be disclosed to the Executive by the Company Affiliates. The Executive hereby agrees that, during the Term and for a period of three years thereafter, he will not use or disclose, furnish or make accessible to anyone, directly or indirectly, any Confidential Information of the Company Affiliates. (b) As used herein, the term "Confidential Information" means any trade secrets, confidential or proprietary information, or other knowledge, know-how, information, documents or materials, owned, developed or possessed by a Company Affiliate pertaining to its businesses the confidentiality of which such company takes reasonable measures to protect, including, but not limited to, trade secrets, techniques, know-how (including designs, plans, procedures, processes and research records), software, computer programs, innovations, discoveries, improvements, research, developments, test results, reports, specifications, data, formats, marketing data and business plans and strategies, agreements and other forms of documents, expansion plans, budgets, projections, and salary, staffing and employment information. Notwithstanding the foregoing, Confidential Information shall not in any event include information which (i) was generally known or generally available to the public prior to its disclosure to the Executive, (ii) becomes generally known or generally available to the public subsequent to its disclosure to the Executive through no wrongful act of the Executive, (iii) is or becomes available to the Executive from sources other than the Company Affiliates which sources are not known to the Executive to be under any duty of confidentiality with respect thereto or (iv) the Executive is required to disclose by applicable law or regulation or by order of any court or federal, state or local regulatory or administrative body (provided that the Executive provides the Company with prior notice of the contemplated disclosure and reasonably cooperates with the Company, at the Company's sole expense, in seeking a protective order or other appropriate protection of such information). 11 8. Specific Performance. -------------------- (a) The Executive acknowledges that the services to be rendered by him hereunder are of a special, unique, extraordinary and personal character and that the Company Affiliates would sustain irreparable harm in the event of a violation by the Executive of Section 7 hereof. Therefore, in addition to any other remedies available, the Company shall be entitled to specific enforcement and/or an injunction from any court of competent jurisdiction restraining the Executive from committing or continuing any such violation of this Agreement without proving actual damages or posting a bond or other security. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened breach, including the recovery of damages. (b) If any of the restrictions on activities of the Executive contained in Section 7 hereof shall for any reason be held by a court of competent jurisdiction to be excessively broad, such restrictions shall be construed so as thereafter to be limited or reduced to be enforceable to the maximum extent compatible with the applicable law as it shall then appear; it being understood that by the execution of this Agreement the parties hereto regard such restrictions as reasonable and compatible with their respective rights. (c) Notwithstanding anything in this Agreement to the contrary, in the event that the Company fails to make any payment of any amounts or provide any of the benefits to the Executive when due as called for under Section 6 of this Agreement and such failure shall continue for twenty (20) days after notice thereof from the Executive, all restrictions on the activities of the Executive under Section 7 hereof shall be immediately and permanently terminated. 9. Withholding. The parties agree that all payments to be made to ----------- the Executive by the Company pursuant to the Agreement shall be subject to all applicable withholding obligations of such company. 10. Notices. All notices required or permitted hereunder shall be in ------- writing and shall be deemed given and received when delivered personally, four (4) days after being mailed if sent by registered or certified mail, postage pre-paid, or by one (1) day after delivery if sent by air courier (for next-day delivery) with evidence of receipt thereof or by facsimile with receipt confirmed by the addressee. Such notices shall be addressed respectively: If to the Executive, to: 10901 Tara Road Potomac, Maryland 20854 12 If to the Company or to the LLC, to: MeriStar Hotel & Resorts, Inc. 1010 Wisconsin Avenue, N.W. Washington, D.C. 20007 Attention: Legal Department or to any other address of which such party may have given notice to the other parties in the manner specified above. 11. Miscellaneous. ------------- (a) This Agreement is a personal contract calling for the provision of unique services by the Executive, and the Executive's rights and obligations hereunder may not be sold, transferred, assigned, pledged or hypothecated by the Executive. The rights and obligations of the Company and the LLC hereunder will be binding upon and run in favor of their respective successors and assigns. The Company will not be deemed to have breached this Agreement if any obligations of the Company to make payments to the Executive are satisfied by the LLC. (b) This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware, without regard to conflict of laws principles. (c) Any controversy arising out of or relating to this Agreement or any breach hereof shall be settled by arbitration in Washington, D.C. by a single neutral arbitrator in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Judgment upon any award rendered may be entered in any court having jurisdiction thereof, except in the event of a controversy relating to any alleged violation by the Executive of Section 7 hereof, in which case the Company shall be entitled to seek injunctive relief from a court of competent jurisdiction without the requirement to seek arbitration. (d) The headings of the various sections of this Agreement are for convenience of reference only and shall not define or limit any of the terms or provisions hereof. (e) The provisions of this Agreement which by their terms call for performance subsequent to the expiration or termination of the Term shall survive such expiration or termination. (f) The Company and the LLC shall reimburse the Executive for all costs incurred by the Executive in any proceeding for the successful enforcement of the terms of this Agreement, including without limitation all costs of investigation and reasonable attorneys fees and expenses. 13 (g) This Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and supersedes all other prior agreements and undertakings, both written and oral, among the parties with respect to the subject matter hereof, all of which shall be terminated on the Commencement Date. In addition, the parties hereto hereby waive all rights such party may have under all other prior agreements, including without limitation, the Executive Employment Agreement entered into as of August 3, 1998 between the Executive and the Company and undertakings, both written and oral, among the parties hereto, or among the Executive, CapStar Hotel Company and CapStar Management Co., L.P., with respect to the subject matter hereof. [SIGNATURE PAGE FOLLOWS] 14 IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date first above written. EXECUTIVE: _________________________________ Paul W. Whetsell COMPANY: MERISTAR HOTELS & RESORTS, INC. By: _____________________________ Name: Christopher L. Bennett Title: Vice President, Legal LLC: MERISTAR MANAGEMENT COMPANY, LLC By: MeriStar Hotels & Resorts, Inc., its general partner By: ___________________________ Name: Christopher L. Bennett Title: Vice President, Legal 15 Schedule A ---------- Executive may act as an officer of CapStar Hotels, Inc. and Latham Hotels, Inc. and their respective subsidiaries in connection with their general affairs and in connection with the ownership, management, financing and sale of their interests (and the interests of entities in which they are general partners or principals) in the following hotels. 1. Ramada Inn, Slidell, Louisiana EX-10.14 3 0003.txt EXHIBIT 10.14 EXECUTION COPY EXECUTIVE EMPLOYMENT AGREEMENT EXECUTIVE EMPLOYMENT AGREEMENT, effective as of April 1, 2000 by and between MERISTAR HOTELS & RESORTS, INC., a Delaware corporation (the "Company"), MERISTAR MANAGEMENT COMPANY, LLC, a Delaware limited liability company (the "LLC"), and JOHN EMERY (the "Executive"), an individual residing at 7308 Calvert Street, Annandale, Virginia 22003. The Company and the LLC desire to employ the Executive in the capacity of Chief Investment Officer, and the Executive desires to be so employed, on the terms and subject to the conditions set forth in this agreement (the "Agreement"); Now, therefore, in consideration of the mutual covenants set forth herein and other good and valuable consideration the parties hereto hereby agree as follows: 1. Employment; Term. The Company and the LLC each hereby employs the ---------------- Executive, and the Executive agrees to be employed by the Company and the LLC, upon the terms and subject to the conditions set forth herein, for a term of three (3) years, commencing on April 1, 2000 (the "Commencement Date"), unless terminated earlier in accordance with Section 4 of this Agreement; provided that -------- ---- such term shall automatically be extended from time to time for additional periods of one (1) calendar year from the date on which it would otherwise expire unless the Executive, on the one hand, or the Company and the LLC, on the other, gives notice to the other party or parties not less than 120 days prior to such date that it elects to permit the Term of this Agreement to expire without extension on such date. (The initial term of this Agreement as the same may be extended in accordance with the terms of this Agreement is hereinafter referred to as the "Term.") 2. Positions; Conduct. ------------------ (a) During the Term, the Executive will hold the title and office of, and serve in the position of, Chief Investment Officer of the Company and the LLC. The Executive shall undertake the responsibilities and exercise the authority customarily performed, undertaken and exercised by persons situated in a similar executive capacity, and shall perform such other specific duties and services (including service as an officer, director or equivalent position of any direct or indirect subsidiary without additional compensation) as they shall reasonably request consistent with the Executive's position. (b) During the Term, the Executive agrees to devote his full business time and attention to the business and affairs of the Company and the LLC and to faithfully and diligently perform, to the best of his ability, all of his duties and responsibilities hereunder; provided that the Executive may -------- ---- devote his business time to providing services to MeriStar Hospitality Corporation and MeriStar Hospitality Operating Partnership, L.P. (collectively, "MeriStar Hospitality"), and may provide services as described in Schedule A attached hereto, so long as such ---------- activity does not interfere with the performance of the Executive's duties hereunder. Nothing in this Agreement shall preclude the Executive from devoting reasonable time and attention to (i) serving, with the approval of the Board, as a director, trustee or member of any committee of any organization, (ii) engaging in charitable and community activities and (iii) managing his personal investments and affairs; provided that such activities do not involve any -------- material conflict of interest with the interests of the Company or, individually or collectively, interfere materially with the performance by the Executive of his duties and responsibilities under this Agreement. Notwithstanding the foregoing and except as expressly provided herein, during the Term, the Executive may not accept employment with any other individual or entity, or engage in any other venture which is directly or indirectly in conflict or competition with the business of the Company or the LLC. (c) The Executive's office and place of rendering his services under this Agreement shall be in the principal executive offices of the Company which shall be in the Washington, D.C. metropolitan area. Under no circumstances shall the Executive be required to relocate from the Washington, D.C. metropolitan area or provide services under this Agreement in any other location other than in connection with reasonable and customary business travel. During the Term, the Company shall provide the Executive with executive office space, and administrative and secretarial assistance and other support services consistent with his position as Chief Investment Officer and with his duties and responsibilities hereunder. 3. Salary; Additional Compensation; Perquisites and Benefits. --------------------------------------------------------- (a) During the Term, the Company and the LLC will pay the Executive a base salary at an aggregate annual rate of not less than $120,000 per annum, subject to annual review by the Compensation Committee of the Board (the "Compensation Committee"), and in the discretion of such Committee, increased from time to time. Once increased, such base salary may not be decreased. Such salary shall be paid in periodic installments in accordance with the Company's standard practice, but not less frequently than semi-monthly. (b) For each fiscal year during the Term, the Executive will be eligible to receive a bonus from the Company. The award and amount of such bonus shall be based upon the achievement of predefined operating or performance goals and other criteria established by the Compensation Committee, which goals shall give the Executive the opportunity to earn a bonus in the following amounts: threshold target -25% of base salary; target - 100% of base salary; and maximum bonus amount - 125 % of base salary. (c) During the Term, the Executive will participate in all plans now existing or hereafter adopted by the Company or the LLC for their management employees or the general benefit of their employees, such as any pension, profit-sharing, bonuses, stock option or other incentive compensation plans, life and health insurance 2 plans, or other insurance plans and benefits on the same basis and subject to the same qualifications as other senior executive officers. (d) The Executive shall be eligible for stock option grants from time to time pursuant to the Company's Incentive Plan in accordance with the terms thereof. (e) The Company and the LLC will reimburse the Executive, in accordance with their standard policies from time to time in effect, for all out-of-pocket business expenses as may be incurred by the Executive in the performance of his duties under this Agreement. (f) The Executive shall be entitled to vacation time to be credited and taken in accordance with the Company's policy from time to time in effect for senior executives, which in any event shall not be less than a total of four weeks per calendar year. (g) To the fullest extent permitted by applicable law, the Executive shall be indemnified and held harmless by the Company and the LLC against any and all judgments, penalties, fines, amounts paid in settlement, and other reasonable expenses (including, without limitation, reasonable attorneys' fees and disbursements) actually incurred by the Executive in connection with any threatened, pending or completed action, suit or proceeding (whether civil, criminal, administrative, investigative or other) for any action or omission in his capacity as a director, officer or employee of the Company or the LLC. Indemnification under this Section 3(g) shall be in addition to, and not in substitution of, any other indemnification by the Company or the LLC of its officers and directors. Expenses incurred by the Executive in defending an action, suit or proceeding for which he claims the right to be indemnified pursuant to this Section 3(g) shall be paid by the Company or the LLC, as the case may be, in advance of the final disposition of such action suit or proceeding upon the Company's or the LLC's receipt of (x) a written affirmation by the Executive of his good faith belief that the standard of conduct necessary for his indemnification hereunder and under the provisions of applicable law has been met and (y) a written undertaking by or on behalf of the Executive to repay the amount advanced if it shall ultimately be determined by a court that the Executive engaged in conduct which precludes indemnification under the provisions of such applicable law. Such written undertaking in clause (y) shall be accepted by the Company or the LLC, as the case may be, without security therefor and without reference to the financial ability of the Executive to make repayment thereunder. The Company and the LLC shall use commercially reasonable efforts to maintain in effect for the Term of this Agreement a directors' and officers' liability insurance policy, with a policy limit of at least $5,000,000, subject to customary exclusions, with respect to claims made against officers and directors of the Company or the LLC; provided, however, the Company -------- ------- or the LLC, as the case may be, shall be relieved of this obligation to maintain directors' and 3 officers' liability insurance if, in the good faith judgment of the Company or the LLC, it cannot be obtained at a reasonable cost. 4. Termination. ----------- (a) The Term will terminate immediately upon the Executive's death or, upon thirty (30) days' prior written notice by the Company, in the case of a determination of the Executive's Disability. As used herein the term "Disability" means the Executive's inability to perform his duties and responsibilities under this Agreement for a period of more than 120 consecutive days, or for more than 180 days, whether or not continuous, during any 365-day period, due to physical or mental incapacity or impairment. A determination of Disability will be made by a physician reasonably satisfactory to both the Executive and the Company and paid for by the Company or the LLC whose decision shall be final and binding on the Executive and the Company; provided that if -------- ---- they cannot agree as to a physician, then each shall select and pay for a physician and these two together shall select a third physician whose fee shall be borne equally by the Executive and either the Company or the LLC and whose determination of Disability shall be binding on the Executive and the Company. Should the Executive become incapacitated, his employment shall continue and all base and other compensation due the Executive hereunder shall continue to be paid through the date upon which the Executive's employment is terminated for Disability in accordance with this section. (b) The Term may be terminated by the Company upon notice to the Executive upon the occurrence of any event constituting "Cause" as defined herein. (c) The Term may be terminated by the Executive upon notice to the Company of any event constituting "Good Reason" as defined herein. 5. Severance. --------- (a) If the Term is terminated by the Company for Cause, the Company and the LLC will pay to the Executive an aggregate amount equal to the Executive's accrued and unpaid base salary through the date of such termination, and all unvested options will terminate immediately and any vested options issued pursuant to the Company's Incentive Plan and held by the Executive at termination, will expire ninety (90) days after the termination date. (b) If the Term is terminated by the Executive other than because of death, Disability or for Good Reason, the Company and the LLC will pay to the Executive an aggregate amount equal to the Executive's accrued and unpaid base salary through the date of such termination, and all unvested options will terminate immediately and any vested options issued pursuant to the Company's Incentive Plan and held by the Executive at termination, will expire ninety (90) days after the termination date. 4 (c) If the Term is terminated upon the Executive's death or Disability, the Company and the LLC will pay to the Executive's estate or the Executive, as the case may be, a lump sum payment equal to the Executive's base salary through the termination date, plus a pro rata portion of the Executive's bonus for the fiscal year in which the termination occurred. In addition, the Company will make payments for one (1) year of all compensation otherwise payable to the Executive pursuant to this Agreement, including, but not limited to, base salary, bonus and welfare benefits. In addition, all of the Executive's unvested stock options and restricted stock awards will immediately vest and become exercisable for a period of one (1) year thereafter and shares of restricted stock of the Company previously granted to the Executive shall become free from all contractual restrictions. (d) Subject to Section 5(e) hereof, if the Term is terminated by the Company without Cause or other than by reason of his death or Disability, in addition to any other remedies available, or if the Executive terminates the Term for Good Reason, the Company and the LLC shall pay the Executive, a lump sum equal to the product of (x) the sum of (A) the Executive's then annual base salary and (B) the amount of the Executive's bonus for the preceding year, multiplied by (y) the greater of (A) two (2) and (B) a fraction, the numerator of which is the number of days remaining in the Term (without regard to extension) and the denominator of which is 365. In addition, all of the Executive's unvested stock options and restricted stock awards will immediately vest and become exercisable for a period of one (1) year thereafter and shares of restricted stock of the Company previously granted to the Executive shall become free from all contractual restrictions, and the Company shall continue in effect the Executive's health benefits noted in Section 3(c) hereof or their equivalent for a period equal to the earlier of (X) the greater of (I) two (2) years or (II) the remainder of the Term without further extension or (Y) the date on which the Executive obtains health insurance coverage from a subsequent employer. (e) (i) If, within twenty-four (24) months following (I) a Change in Control or (II) a MeriStar Hospitality Change in Control (as each term is defined in Section 5(i) hereof), the Term is terminated by the Executive for Good Reason or by the Company without Cause, in addition to any other rights which the Executive may have under law or otherwise, the Company and the LLC shall pay to the Executive the same payments and benefits provided for under Section 5(d) hereof, provided (X) that the amount of the multiplier in clause 5(d)(y)(A) of Section 5 hereof shall be increased from two (2) to three (3); and provided; further that during any period following such termination that the Executive shall be in the employ of MeriStar Hospitality, the Executive's health insurance benefits shall not be provided pursuant to this Section 5(e) but shall be provided pursuant to the applicable provisions of Executive Employment Agreement entered into as of the date hereof by and between MeriStar Hospitality and the Executive (the "MeriStar Hospitality Agreement"). (ii) If, within twenty-four (24) months following a MeriStar Hospitality Change of Control (as such term is defined in Section 5(i)(B) of the Agreement) the Executive does not terminate the Term of this Agreement, but terminates 5 the Term of the MeriStar Hospitality Agreement pursuant to Section 5(e) of such agreement, in addition to any payments and benefits provided by such agreement, the Company and the LLC shall pay to the Executive a lump sum payment equal to the product of (x) the sum of (A) the Executive's then annual base salary and (B) the amount of the Executive's bonus for the preceding year multiplied by (y) three (3). (f) If at any time the Term is not extended pursuant to the proviso to Section 1 hereof as a result of the Company giving notice thereunder that it elects to permit the term of this Agreement to expire without extension, the Company shall be deemed to have terminated the Executive's employment without Cause; provided; however; the Company and the LLC shall pay to the -------- ------- Executive in lieu of the payments provided by Section 5(d) hereof, in accordance with the regular payroll practices of the Company, an amount equal to the sum of (x) the Executive's then annual base salary for one year following such non- extension and (y) the amount of the Executive's bonus for the preceding year. In addition, all of the Executive's unvested stock options and restricted stock awards will immediately vest and become exercisable for a period of one (1) year thereafter and shares of restricted stock of the Company previously granted to the Executive shall become free from all contractual restrictions, and the Company shall continue in effect the Executive's health benefits noted in Section 3(c) hereof or their equivalent for a period equal to the earlier of (x) one (1) year from the end of the Term or (y) the date on which the Executive obtains health insurance from a subsequent employer. (g) As used herein, the term "Cause" means: (i) the Executive's willful and intentional failure or refusal to perform or observe any of his material duties, responsibilities or obligations set forth in this Agreement; provided, however, that the -------- ------- Company shall not be deemed to have Cause pursuant to this clause (i) unless the Company gives the Executive written notice that the specified conduct has occurred and making specific reference to this Section 6(g)(i) and the Executive fails to cure the conduct within thirty (30) days after receipt of such notice; (ii) any willful and intentional act of the Executive involving malfeasance, fraud, theft, misappropriation of funds, embezzlement or dishonesty affecting the Company or the LLC; or (iii) the Executive's conviction of, or a plea of guilty or nolo contendere to, an offense which is a felony in the jurisdiction involved. Termination of the Executive for Cause shall be communicated by a Notice of Termination. For purposes of this Agreement, a "Notice of Termination" shall mean delivery to the Executive of a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the entire membership of the Company's Board at a meeting of the Board called and held for the purpose (after reasonable notice to the Executive and reasonable opportunity for the Executive, together with the Executive's counsel, to be heard before the Board prior to such vote) of finding that in the good faith opinion of the 6 Board, the Executive was guilty of conduct constituting Cause and specifying the particulars thereof in detail, including, with respect to any termination based upon conduct described in clause (i) above that the Executive failed to cure such conduct during the thirty-day period following the date on which the Company gave written notice of the conduct referred to in such clause (i). For purposes of this Agreement, no such purported termination of the Executive's employment shall be effective without such Notice of Termination; (h) As used herein, the term, "Good Reason" means the occurrence of any of the following, without the prior written consent of the Executive: (i) assignment of the Executive of duties materially inconsistent with the Executive's positions as described in Section 2(a) hereof, or any significant diminution in the Executive's duties or responsibilities, other than in connection with the termination of the Executive's employment for Cause, Disability or as a result of the Executive's death or by the Executive other than for Good Reason; (ii) the change in the location of the Company's principal executive offices or of the Executive's principal place of employment to a location outside the Washington, D.C. metropolitan area; (iii) any material breach of this Agreement by the Company or the LLC which is continuing; (iv) a Change in Control; or (v) a MeriStar Hospitality Change in Control. provided, however, that the Executive shall not be deemed to have Good Reason - -------- ------- pursuant to clauses (i) or (iii) above unless the Executive gives the Company or the LLC, as the case may be, written notice that the specified conduct or event has occurred and the Company or the LLC fails to cure such conduct or event within thirty (30) days of the receipt of such notice. (i) As used herein, the terms "Change in Control" and "MeriStar Hospitality Change in Control" shall have the following meanings: (A) "Change in Control" means the occurrence of any one of the following events: (i) the acquisition (other than from the Company) by any "Person" (as the term is used for purposes of Sections 13(d) or 14(d) of the Exchange Act) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty (30%) percent or more of the combined voting power of the Company's then outstanding voting securities; or 7 (ii) the individuals who were members of the Board (the "Incumbent Board") during the previous twelve (12) month period, cease for any reason to constitute at least a majority of the Board; provided, -------- however, that if the election, or nomination for election by the Company's ------- stockholders, of any new director was approved by a vote of at least two- thirds of the Incumbent Board, such new director shall, for purposes of this Agreement, be considered as a member of the Incumbent Board; or (iii) approval by the stockholders of the Company of (a) merger or consolidation involving the Company if the stockholders of the Company, immediately before such merger or consolidation do not, as a result of such merger or consolidation, own, directly or indirectly, more than fifty (50%) percent of the combined voting power of the then outstanding voting securities of the corporation resulting from such merger or consolidation in substantially the same proportion as their ownership of the combined voting power of the voting securities of the Company outstanding immediately before such merger or consolidation or (b) a complete liquidation or dissolution of the Company or an agreement for the sale or other disposition of all or substantially all of the assets of the Company. (iv) approval by the stockholders of the Company of any transaction (including without limitation a "going private transaction") involving the Company if the stockholders of the Company, immediately before such transaction, do not as a result of such transaction, own directly or indirectly, more than fifty (50%) percent of the combined voting power of the then outstanding voting securities of the corporation resulting from such transaction in substantially the same proportion as their ownership of the combined voting power of the voting securities of the Company outstanding immediately before such transaction. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur pursuant to clause (i) above solely because thirty (30%) percent or more of the combined voting power of the Company's then outstanding securities is acquired by (a) a trustee or other fiduciary holding securities under one or more employee benefit plans maintained by the Company or any of its subsidiaries or (b) any corporation which, immediately prior to such acquisition, is owned directly or indirectly by the stockholders of the Company in the same proportion as their ownership of stock in the Company immediately prior to such acquisition; or (B) "MeriStar Hospitality Change in Control" means the occurrence of any one of the following events: (i) the acquisition (other than from MeriStar Hospitality) by any "Person" (as the term is used for purposes of Sections 13(d) or 14(d) of the Exchange Act) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the 8 Exchange Act) of thirty (30%) percent or more of the combined voting power of MeriStar Hospitality's then outstanding voting securities; or (ii) the individuals who were members of the Board of Directors of MeriStar Hospitality (the "MeriStar Hospitality Incumbent Board") during the previous twelve (12) month period, cease for any reason to constitute at least a majority of the Board of Directors of MeriStar Hospitality; provided, however, that if the election, or nomination for election by MeriStar Hospitality's stockholders, of any new director was approved by a vote of at least two-thirds of the MeriStar Hospitality Incumbent Board, such new director shall, for purposes of this Agreement, be considered as a member of the MeriStar Hospitality Incumbent Board; or (iii) approval by stockholders of MeriStar Hospitality of (a) merger or consolidation involving MeriStar Hospitality if the stockholders of MeriStar Hospitality, immediately before such merger or consolidation do not, as a result of such merger or consolidation, own, directly or indirectly, more than fifty (50%) percent of the combined voting power of the then outstanding voting securities of the corporation resulting from such merger or consolidation in substantially the same proportion as their ownership of the combined voting power of the voting securities of MeriStar Hospitality outstanding immediately before such merger or consolidation or (b) a complete liquidation or dissolution of MeriStar Hospitality or an agreement for the sale or other disposition of all or substantially all of the assets of MeriStar Hospitality. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur pursuant to clause (i) above solely because thirty (30%) percent or more of the combined voting power of MeriStar Hospitality's then outstanding securities is acquired by (a) a trustee or other fiduciary holding securities under one or more employee benefit plans maintained by MeriStar Hospitality or any of its subsidiaries or (b) any corporation which, immediately prior to such acquisition, is owned directly or indirectly by the stockholders of MeriStar Hospitality in the same proportion as their ownership of stock in MeriStar Hospitality immediately prior to such acquisition. (j) The amounts required to be paid and the benefits required to be made available to the Executive under this Section 5 are absolute. Under no circumstances shall the Executive, upon the termination of his employment hereunder, be required to seek alternative employment and, in the event that the Executive does secure other employment, no compensation or other benefits received in respect of such employment shall be set-off or in any other way limit or reduce the obligations of the Company under this Section 5. (k) Excise Tax Payments. -------------------- 9 (i) Gross-Up Payment. If it shall be determined that any ---------------- payment or distribution of any type to or in respect of the Executive, by the Company, the LLC, or any other person, whether paid or payable or distributed or distributable pursuant to the terms of the Agreement or otherwise (the "Total Payments"), is or will be subject to the excise tax imposed by Section 4999 of the Internal Code of 1986, as amended (the "Code") or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes) imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Total Payments. (ii) Determination by Accountant. --------------------------- (A) All computations and determinations relevant to this Section 5(k) shall be made by a national accounting firm selected by the Company from among the five (5) largest accounting firms in the United States (the "Accounting Firm") which firm may be the Company's accountants. Such determinations shall include whether any of the Total Payments are "parachute payments" (within the meaning of Section 280G of the Code). In making the initial determination hereunder as to whether a Gross-Up Payment is required the Accounting Firm shall determine that no Gross-Up Payment is required, if the Accounting Firm is able to conclude that no "Change of Control" has occurred (within the meaning of Section 280G of the Code) on the basis of "substantial authority" (within the meaning of Section 6230 of the Code) and shall provide opinions to that effect to both the Company and the Executive. If the Accounting Firm determines that a Gross-Up Payment is required, the Accounting Firm shall provide its determination (the "Determination"), together with detailed supporting calculations regarding the amount of any Gross-Up Payment and any other relevant matter both to the Company and the Executive by no later than ten (10) days following the Termination Date, if applicable, or such earlier time as is requested by the Company or the Executive (if the Executive reasonably believes that any of the Total Payments may be subject to the Excise Tax). If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall furnish the Executive and the Company with a written statement that such Accounting Firm has concluded that no Excise Tax is payable (including the reasons therefor) and that the Executive has substantial authority not to report any Excise Tax on his federal income tax return. (B) If a Gross-Up Payment is determined to be payable, it shall be paid to the Executive within twenty (20) days after the Determination (and all accompanying calculations and other material supporting the Determination) is delivered to the Company by the Accounting Firm. Any 10 determination by the Accounting Firm shall be binding upon the Company and the Executive, absent manifest error. (C) As a result of uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments not made by the Company should have been made ("Underpayment"), or that Gross-Up Payments will have been made by the Company which should not have been made ("Overpayments"). In either such event, the Accounting Firm shall determine the amount of the Underpayment or Overpayment that has occurred. In the case of an Underpayment, the amount of such Underpayment (together with any interest and penalties payable by the Executive as a result of such Underpayment) shall be promptly paid by the Company to or for the benefit of the Executive. (D) In the case of an Overpayment, the Executive shall, at the direction and expense of the Company, take such steps as are reasonably necessary (including the filing of returns and claims for refund), follow reasonable instructions from, and procedures established by, the Company, and otherwise reasonably cooperate with the Company to correct such Overpayment, provided, however, that (i) the Executive shall not in any event be obligated to return to the Company an amount greater than the net after-tax portion of the Overpayment that he has retained or has recovered as a refund from the applicable taxing authorities and (ii) this provision shall be interpreted in a manner consistent with the intent of Section 5(k)(i), which is to make the Executive whole, on an after-tax basis, from the application of the Excise Taxes, it being acknowledged and understood that the correction of an Overpayment may result in the Executive repaying to the Company an amount which is less than the Overpayment. (E) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service relating to the possible application of the Excise Tax under Section 4999 of the Code to any of the payments and amounts referred to herein and shall afford the Company, at its expense, the opportunity to control the defense of such claim. 6. Confidential Information. ------------------------ (a) The Executive acknowledges that the Company and its subsidiaries or affiliated ventures ("Company Affiliates") own and have developed and compiled, and will in the future own, develop and compile certain Confidential Information and that during the course of his rendering services hereunder Confidential Information will be disclosed to the Executive by the Company Affiliates. The Executive hereby agrees that, during the Term and for a period of three years thereafter, he will not 11 use or disclose, furnish or make accessible to anyone, directly or indirectly, any Confidential Information of the Company Affiliates. (b) As used herein, the term "Confidential Information" means any trade secrets, confidential or proprietary information, or other knowledge, know-how, information, documents or materials, owned, developed or possessed by a Company Affiliate pertaining to its businesses the confidentiality of which such company takes reasonable measures to protect, including, but not limited to, trade secrets, techniques, know-how (including designs, plans, procedures, processes and research records), software, computer programs, innovations, discoveries, improvements, research, developments, test results, reports, specifications, data, formats, marketing data and business plans and strategies, agreements and other forms of documents, expansion plans, budgets, projections, and salary, staffing and employment information. Notwithstanding the foregoing, Confidential Information shall not in any event include information which (i) was generally known or generally available to the public prior to its disclosure to the Executive, (ii) becomes generally known or generally available to the public subsequent to its disclosure to the Executive through no wrongful act of the Executive, (iii) is or becomes available to the Executive from sources other than the Company Affiliates which sources are not known to the Executive to be under any duty of confidentiality with respect thereto or (iv) the Executive is required to disclose by applicable law or regulation or by order of any court or federal, state or local regulatory or administrative body (provided that the Executive provides the Company with prior notice of the contemplated disclosure and reasonably cooperates with the Company, at the Company's sole expense, in seeking a protective order or other appropriate protection of such information). 7. Specific Performance. -------------------- (a) The Executive acknowledges that the services to be rendered by him hereunder are of a special, unique, extraordinary and personal character and that the Company Affiliates would sustain irreparable harm in the event of a violation by the Executive of Section 6 hereof. Therefore, in addition to any other remedies available, the Company shall be entitled to specific enforcement and/or an injunction from any court of competent jurisdiction restraining the Executive from committing or continuing any such violation of this Agreement without proving actual damages or posting a bond or other security. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened breach, including the recovery of damages. (b) If any of the restrictions on activities of the Executive contained in Section 7 hereof shall for any reason be held by a court of competent jurisdiction to be excessively broad, such restrictions shall be construed so as thereafter to be limited or reduced to be enforceable to the maximum extent compatible with the applicable law as it shall then appear; it being understood that by the execution of this Agreement the parties hereto regard such restrictions as reasonable and compatible with their respective rights. 12 (c) Notwithstanding anything in this Agreement to the contrary, in the event that the Company fails to make any payment of any amounts or provide any of the benefits to the Executive when due as called for under Section 5 of this Agreement and such failure shall continue for twenty (20) days after notice thereof from the Executive, all restrictions on the activities of the Executive under Section 6 hereof shall be immediately and permanently terminated. 8. Withholding. The parties agree that all payments to be made to ----------- the Executive by the Company pursuant to the Agreement shall be subject to all applicable withholding obligations of such company. 9. Notices. All notices required or permitted hereunder shall be in ------- writing and shall be deemed given and received when delivered personally, four (4) days after being mailed if sent by registered or certified mail, postage pre-paid, or by one (1) day after delivery if sent by air courier (for next-day delivery) with evidence of receipt thereof or by facsimile with receipt confirmed by the addressee. Such notices shall be addressed respectively: If to the Executive, to: 7308 Calvert Street Annandale, Virginia 22003 If to the Company or to the LLC, to: MeriStar Hotel & Resorts, Inc. 1010 Wisconsin Avenue, N.W. Washington, D.C. 20007 Attention: Legal Department or to any other address of which such party may have given notice to the other parties in the manner specified above. 10. Miscellaneous. ------------- (a) This Agreement is a personal contract calling for the provision of unique services by the Executive, and the Executive's rights and obligations hereunder may not be sold, transferred, assigned, pledged or hypothecated by the Executive. The rights and obligations of the Company and the LLC hereunder will be binding upon and run in favor of their respective successors and assigns. The Company will not be deemed to have breached this Agreement if any obligations of the Company to make payments to the Executive are satisfied by the LLC. (b) This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware, without regard to conflict of laws principles. 13 (c) Any controversy arising out of or relating to this Agreement or any breach hereof shall be settled by arbitration in Washington, D.C. by a single neutral arbitrator in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Judgment upon any award rendered may be entered in any court having jurisdiction thereof, except in the event of a controversy relating to any alleged violation by the Executive of Section 6 hereof, in which case the Company shall be entitled to seek injunctive relief from a court of competent jurisdiction without the requirement to seek arbitration. (d) The headings of the various sections of this Agreement are for convenience of reference only and shall not define or limit any of the terms or provisions hereof. (e) The provisions of this Agreement which by their terms call for performance subsequent to the expiration or termination of the Term shall survive such expiration or termination. (f) The Company and the LLC shall reimburse the Executive for all costs incurred by the Executive in any proceeding for the successful enforcement of the terms of this Agreement, including without limitation all costs of investigation and reasonable attorneys fees and expenses. (g) This Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and supersedes all other prior agreements and undertakings, both written and oral, among the parties with respect to the subject matter hereof, all of which shall be terminated on the Commencement Date. In addition, the parties hereto hereby waive all rights such party may have under all other prior agreements and undertakings, both written and oral, among the parties hereto, or among the Executive, CapStar Hotel Company and CapStar Management Co., L.P., with respect to the subject matter hereof. [SIGNATURE PAGE FOLLOWS] 14 IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date first above written. EXECUTIVE: ______________________________ John Emery COMPANY: MERISTAR HOTELS & RESORTS, INC. By:____________________________ Name: Title: LLC: MERISTAR MANAGEMENT COMPANY LLC By: MeriStar Hotels & Resorts, Inc., its general partner By:____________________________ Name: Title: 15 Schedule A ---------- Executive may act as an officer of CapStar Hotels, Inc. and Latham Hotels, Inc. and their respective subsidiaries in connection with their general affairs and in connection with the ownership, management, financing and sale of their interests (and the interests of entities in which they are general partners or principals) in the following hotels. 1. Ramada Inn, Slidell, Louisiana A-1 EX-27.1 4 0004.txt EXHIBIT 27.1
5 1,000 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 9,989 0 80,975 3,732 6,976 122,491 27,503 4,499 374,799 145,727 95,184 0 0 359 95,929 374,799 0 1,069,548 0 393,945 648,073 0 4,530 23,000 8,971 14,029 0 0 0 14,029 0.42 0.41
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