10-K

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

     For the fiscal year ended December 31, 2001

                                       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 issuer as specified in its charter)

           Delaware                                   52-2101815
  (State or other jurisdiction)                   (I.R.S. Employer)
of incorporation or organization)               Identification Number)

                           1010 Wisconsin Avenue, N.W.
                                Washington, D.C.
                    (Address of principal executive offices)

                                      20007
                                   (Zip code)

       Registrant's telephone number, including area code: (202) 965-4455

           Securities registered pursuant to Section 12(b) of the Act:

                                                 Name of each exchange on
                                                 ------------------------
         Title of each class                         which registered
         -------------------                         ----------------
Common Stock, par value $0.01 per share           New York Stock Exchange

           Securities registered pursuant to Section 12(g) of the Act:

                                      None.

     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 than 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 [_]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]

     Based on the average sale price at March 5, 2002, the aggregate market
value of the voting stock held by nonaffiliates of the registrant was
$20,046,234.

     The number of shares of the Registrant's common stock outstanding as of
March 5, 2002 was 37,188,574.

                      DOCUMENTS INCORPORATED BY REFERENCE:

     Part III--Those portions of the Registrant's definitive proxy statement
relating to Registrant's 2002 Annual Meeting of Stockholders which are
incorporated into Items 10, 11, 12, and 13.



                                     PART I

ITEM 1. BUSINESS

                                   THE COMPANY

     We manage, lease and operate a portfolio of hospitality properties, and
provide related services in the hotel, corporate housing, resort, conference
center and golf markets. Our portfolio is diversified by franchise and brand
affiliations. As of December 31, 2001, we managed 229 hotels with 51,880 rooms
in 43 states, the District of Columbia, and Canada, and leased 48
limited-service hotels with 6,581 rooms in 12 states. In addition, we had 3,054
apartments under lease in the United States, Canada, France and the United
Kingdom at December 31, 2001.

     We are the lessee, manager and operator of various hospitality-related
assets, including all of the hotels owned by MeriStar Hospitality Corporation.
We are the largest independent hotel management company in the United States,
based on rooms under management. As of December 31, 2001, we managed 229 hotels;
112 of these hotels are owned by MeriStar Hospitality. We also lease 48 hotels
from Winston Hotels, Inc.; we manage 40 of these hotels. The hotels we manage
are located throughout the United States and Canada, including most major
metropolitan areas and rapidly growing secondary cities. Our managed hotels
include hotels operated under nationally recognized brand names such as
Hilton(R), Sheraton(R), Westin(R), Radisson(R), Marriott(R), Doubletree(R),
Embassy Suites(R), and Holiday Inn(R). Our business strategy is to manage the
renovation, repositioning and operations of each property according to a
business plan specifically tailored to the characteristics of the property and
its market.

     We manage properties primarily within the upscale, full-service and premium
limited-service sector, and provide related management services for owners of
properties in both sectors as well. We believe the upscale, full-service segment
of the lodging industry offers strong potential operating results and investment
opportunities. The real estate market has recently experienced a significant
slowdown in the construction of upscale, full-service hotels. Also, upscale,
full-service hotels have particular appeal to both business executives and
upscale leisure travelers. We believe the combination of these factors offers
good potential opportunities for us in this sector of the lodging industry.

     We are the lessor of high quality, fully furnished one-, two- and
three-bedroom and larger accommodations through our BrideStreet brand. We lease
substantially all of our Corporate Housing accommodations through flexible,
short-term leasing arrangements in order to match our supply of accommodations
with current and anticipated client demand. We believe our flexible leasing
strategy allows us to react to changes in market demand for particular
geographic locations and types of accommodations. Our management strives to
develop strong relationships with property managers to ensure that we have a
reliable supply of high quality, conveniently located accommodations.

     We were formed on August 3, 1998 when we were spun off by CapStar Hotel
Company and became the lessee and manager of all of CapStar's hotels. After the
spin-off, American General Hospitality Corporation, (a Maryland corporation
operating as a real estate investment trust or "REIT") and CapStar Hotel Company
merged to form MeriStar Hospitality Corporation. We then acquired the third
party lessee of most of the hotels owned by American General Hospitality, and
substantially all of the assets and certain liabilities of the third-party
manager of most of the hotels owned by American General Hospitality.

     We continue to capitalize on our hospitality management experience and
expertise. We secured a net of nine additional management contracts in 2001. We
also worked closely with the owners of the hotels we manage to obtain revenues
and reduce costs in the face of an extremely difficult economic and operating
environment.

     Our senior management team has successfully managed hotels in all segments
of the lodging industry. We attribute our management success to our ability to
analyze each hotel as a unique property and to identify particular cash flow
growth opportunities present at each hotel. Our principal operating objectives
are to continue to analyze each hotel as a unique property in order to generate
higher revenue per available room and increase net operating

                                       2



income, while providing our hotel guests with high-quality service and value.
Given the challenging operating environment that has resulted from a slowing
economy coupled with the disruptions caused by the events of September 11, we
believe our experience and strategies are now even more valuable to the owners
of the hotels we manage.

     We have invested $10 million in MeriStar Investment Partners, a joint
venture with Oak Hill Capital Partners, L.P. This joint venture was established
to acquire upscale, full-service hotels. As of December 31, 2001, the joint
venture had acquired 10 full-service hotels throughout the United States. We
manage all of these hotels. We are continually looking for additional hotel
investment opportunities that we can bring to new joint venture partners.

Business Strategy

     We plan to focus on the internal growth of our two core operating segments
- - Hotel Management and Corporate Housing.

     In our Hotel Management business segment, we plan to generate earnings
through base fees, incentive fees and other services from our existing
management contracts as well as additional management contracts we may acquire.
We are also currently negotiating the conversion of our Winston leases of
limited-service hotels to management contracts. We believe this will better
align our interests with Winston, the owners of the properties we lease.

     In our Corporate Housing business segment, we plan to generate net income
by improving our inventory management and cost control in our existing markets.
We may also add additional markets in North America if the conditions are
favorable. In our European markets we plan to manage shifting demand in London
and expand the Paris operations acquired in 2001.

     We expect to finance future acquisitions through a combination of
additional borrowings under our credit facilities and the issuance of
partnership interests and/or our common stock. We believe these sources of
capital will be sufficient to provide for our short-term capital needs. In order
to provide sufficient long-term capital for our operations, we will attempt to
refinance our existing senior secured credit facility during 2002.

Relationship with MeriStar Hospitality

     We have historically had a close business relationship with MeriStar
Hospitality Corporation, a REIT, and we have five common board members and five
common senior executives.

REIT Modernization Act

     Until January 1, 2001, in order for MeriStar Hospitality to maintain its
tax status as a real estate investment trust, MeriStar Hospitality was not
permitted to engage in the operations of its hotel properties. To comply with
this requirement, MeriStar Hospitality leased most of its real property to us
and one other third-party lessee/manager. In late 1999, the Federal government
enacted changes to the Internal Revenue Code that now permit MeriStar
Hospitality to create taxable subsidiaries, which are subject to taxation
similar to a subchapter C corporation and are permitted to lease MeriStar
Hospitality's real property.

     Although a taxable subsidiary of a REIT may lease real property, it is not
permitted to manage the properties itself; it must enter into an "arms-length"
management agreement with an independent third-party manager that is actively
involved in the trade or business of hotel management and manages properties on
behalf of other owners. We are such a qualified independent third party manager.

     In connection with MeriStar Hospitality's creation of its taxable
subsidiaries, we assigned our leases of hotels owned by MeriStar Hospitality to
taxable subsidiaries of MeriStar Hospitality effective January 1, 2001 and
entered into management contracts with those taxable subsidiaries to manage
those hotels. Under the management agreements, we receive a management fee
based on total hotel revenue that is subject to increase based on the
achievement of specified operating thresholds. We have structured the management
agreements to substantially

                                       3



mirror the economics of the prior leases. We believe the elimination of the
lease structure reduces our exposure to fluctuations in the economy, and the
management agreements provide us with a more stable source of revenue.

The Intercompany Agreement

     We are party to an intercompany agreement with MeriStar Hospitality. For so
long as the agreement remains in effect, we are prohibited from making real
property investments that a real estate investment trust could make unless:

     .    MeriStar Hospitality is first given the opportunity but elects not to
          pursue the investments;

     .    The investment is on land already owned or leased by us or subject to
          a lease or purchase option in favor of us;

     .    We will operate the property under a trade name owned by us; or

     .    The investment is a minority investment made as part of a lease or
          management agreement arrangement by us.

     The intercompany agreement will generally grant us the right of first
refusal to become the manager of any real property acquired by MeriStar
Hospitality. MeriStar Hospitality will make such an opportunity available to us
only if MeriStar Hospitality determines that:

     .    Consistent with its status as a real estate investment trust, MeriStar
          Hospitality must enter into a management agreement with an
          unaffiliated third party with respect to the property;

     .    We are qualified to be the manager of that property; and

     .    MeriStar Hospitality decides not to have the property operated by the
          owner of a hospitality trade name under that trade name.

     Because of the provisions of the intercompany agreement, we are restricted
in the nature of our business and the opportunities we may pursue.

Services
- --------

     Under our intercompany agreeement with MeriStar Hospitality we provide each
other with certain services. These may include administrative, renovation
supervision, corporate, accounting, financial, risk management, legal, tax,
information technology, human resources, acquisition identification and due
diligence, and operational services. We believe we compensate each other in an
amount that would be charged by an unaffiliated third party for comparable
services. The arrangements relating to the provision of these services were not
subject to arms-length negotiation.

Equity Offerings
- ----------------

     If we or MeriStar Hospitality wish to issue securities, the issuing party
will give notice to the other party as promptly as practicable of the proposed
securities issuance. The notice will include the proposed material terms of the
issuance, to the extent determined by the issuing party, including whether such
issuance is proposed to be in a public or private offering, the amount of
securities proposed to be issued and the manner of determining the offering
price, and other terms of the securities. The non-issuing party will cooperate
with the issuing party by assisting in the preparation of any registration
statement or other document required in connection with the issuance and by
providing the issuing party with such information as may be required to be
included in the registration statement or offering document.

                                       4



Term
- ----

     The Intercompany Agreement will terminate upon the earlier of August 3,
2008 and a change in our ownership or control.

The Management Agreements with MeriStar Hospitality

Management Agreements
- ---------------------

     We currently have management agreements with respect to all 112 hotels
owned by MeriStar Hospitality.

Management Fees and Performance Standards
- -----------------------------------------

     Under the management agreements with MeriStar Hospitality, we receive a
management fee for each hotel equal to a specified percentage of aggregate hotel
operating revenues, increased or reduced, as the case may be, by 20% of the
positive or negative difference between:

     .    The actual excess of total operating revenues over total operating
          expenses; and

     .    A projected excess of total operating revenues over total operating
          expenses.

     The total management fee for a hotel in any fiscal year will not be less
than the base fee of 2.5%, or greater than 4.0% (with incentive fees) of
aggregate hotel operating revenues.

Term and Termination
- --------------------

     The management agreements with MeriStar Hospitality generally have initial
terms of 10 years with three renewal periods of five years each, except for four
management agreements that have initial terms of one year with additional
one-year renewal periods. A renewal will not go into effect if a change in the
federal tax laws permits MeriStar Hospitality or one of its subsidiaries to
operate the hotel directly without adversely affecting MeriStar Hospitality's
ability to qualify as a real estate investment trust or if we elect not to renew
the agreement. MeriStar Hospitality may elect not to renew the management
agreements only as discussed below.

     MeriStar Hospitality's taxable subsidiaries have the right to terminate a
management agreement for a hotel upon the sale of the hotel to a third party or
if the hotel is destroyed and not rebuilt after a casualty. Upon that
termination, MeriStar Hospitality's taxable subsidiary will be required to pay
us the fair market value of the management agreement. That fair market value
will be equal to the present value of the remaining payments (discounted using a
10% rate) under the then-existing term of the agreement, based on the operating
results for the 12 months preceding the termination. MeriStar Hospitality's
taxable subsidiaries will be able to credit against any termination payments the
present value of projected fees (discounted using a 10% rate) under any
management agreements or leases entered into between MeriStar Hospitality and us
(or our subsidiaries) after August 3, 1998.

     If a hotel's gross operating profit is less than 85% of the amount
projected in the hotel's budget in any fiscal year and gross operating profit
from that hotel is less than 90% of the projected amount in the next fiscal
year, MeriStar Hospitality's taxable subsidiaries will have the right to
terminate the management agreement for the hotel, unless:

     .    MeriStar Hospitality did not materially comply with the capital
          expenditures contemplated by the budget for either or both of the
          applicable fiscal years; or

     .    We cure the shortfall by agreeing to reduce our management fee for the
          next fiscal year by the amount of the shortfall between the actual
          operating profit for the second fiscal year and 90% of the projected
          gross operating profit for that year.

                                       5



     We can only use the cure right once during the term of each management
agreement.

Assignment
- ----------

     We do not have the right to assign a management agreement without the prior
written consent of the relevant taxable subsidiary of MeriStar Hospitality. A
change in control of our company will require MeriStar Hospitality's consent,
and they may grant or withhold their consent at their sole discretion.

Borrowings From MeriStar Hospitality

     We have a revolving credit agreement with MeriStar Hospitality under which
MeriStar Hospitality may lend us up to $50 million for general corporate
purposes. On January 25, 2002, we amended this revolving credit agreement to
provide revised, relaxed financial covenants. These covenant revisions are
similar to those made to our senior secured credit facility. The covenant
revisions are effective through the maturity of the revolving credit facility,
which is 91 days after the maturity date of our senior credit facility. As of
December 31, 2001, we had $36.0 million of borrowings outstanding under the
revolving credit facility at an interest rate of 10.8%.

     In connection with the execution of the amendment to the revolving credit
agreement, we executed a Term Note with MeriStar Hospitality in the amount of
$13.1 million. This term note refinances our account payable to MeriStar
Hospitality. The Term Note bears interest at the 30-day London Interbank Offered
Rate plus 650 basis points and the maturity date is the same as that of the
revolving credit agreement.

Other Recent Developments

     On January 28, 2002, we amended our $100.0 million senior secured credit
facility provided by a syndicate of banks. The amendment provided financial
covenant relief through the maturity of the senior credit facility, and the
interest rate of the senior secured credit facility was increased by 100 basis
points to the 30-day London Interbank Offered Rate plus 450 basis points. The
amendment also reduced the borrowing capacity of the facility to $82.5 million.
The term of the senior secured credit facility was extended to February 28,
2003. As of December 31, 2001, we had $82.5 million of borrowings under the
senior secured credit facility at a weighted average effective interest rate of
7.9%.

                                    BUSINESS

Business Segments

     We operate primarily in two segments, Hotel Management and Corporate
Housing. We operate our Corporate Housing division under the trade name
BridgeStreet Corporate Housing Worldwide. Each segment is managed separately
because of its distinctive products and services and is a reportable operating
segment. We evaluate the performance of each segment based on earnings before
interest, taxes, depreciation and amortization.

     The following table summarizes certain segment financial data as of and for
the year ended December 31 (amounts in thousands):



                                                                2001        2000         1999
                                                              --------   ----------   ----------
                                                                             
Hotel Management
Revenues...................................................   $201,843   $1,345,144   $1,292,221
Earnings (loss) before Interest, Taxes, Depreciation and
 Amortization..............................................     17,890       16,718       23,500
Total Assets...............................................     22,692      156,972      111,216
Corporate Housing
Revenues...................................................   $103,733   $   64,910           --
Earnings before Interest, Taxes, Depreciation and
 Amortization..............................................      1,139        4,650           --
Total Assets...............................................     19,108       22,878           --


                                       6



     Revenues for foreign operations for the year ended December 31 were as
follows (amounts in thousands):

                           2001       2000        1999
                          -------    -------    -------
Canada.................   $11,200    $27,724    $21,477
United Kingdom.........   $30,460    $16,152         --
France.................   $   196         --         --

Hotel Management

Operating Strategy

     Our Hotel Management division's principal operating objectives are to
generate higher revenue per available room and increase net operating income of
the hotels we manage, while providing our guests with high-quality service and
value. We believe that skilled management is the most critical element in
maximizing revenue and cash flow in properties, especially in upscale,
full-service properties.

     Personnel at our Corporate Office carry out financing and investment
activities and provide services to support and monitor our on-site hotel
operating executives. Each of our executive departments, including Hotel
Operations, Sales and Marketing, Human Resources, Food and Beverage, Technical
Services, Information Technology, Development, Legal, and Corporate Finance, is
headed by an executive with significant experience in that area. These
departments support the hotel operating executives by providing accounting and
budgeting services, property management tools and other resources that can be
created, maintained and provided more efficiently and effectively, centrally at
our Corporate Office.

     Key elements of our management programs include the following:

Comprehensive Budgeting and Monitoring
- --------------------------------------

     Our operating strategy begins with an integrated budget planning process.
The budget is implemented by individual on-site managers and monitored by our
corporate staff. Our Corporate Office personnel work with the property-based
managers to set targets for cost and revenue categories at each of the
properties. These targets are based on historical operating performance, planned
renovations, operational efficiencies and local market conditions. Through
effective and timely use of our comprehensive financial information and
reporting systems, we are able to monitor actual performance efficiently. As a
result, we can rapidly adjust prices, staffing levels and sales efforts to take
advantage of changes in the market and to improve revenue yield.

Targeted Sales and Marketing
- ----------------------------

     We employ a systematic approach toward identifying and targeting demand
segments for each property in order to maximize market penetration. Executives
at our Corporate Office and property-based managers divide these segments into
smaller subsegments (typically ten or more for each property) and develop
tailored marketing plans to suit each such segment. We support each property's
local sales efforts with Corporate Office sales executives who develop and
implement new marketing programs, and monitor and respond to specific market
needs and preferences. We employ revenue yield management systems to manage each
property's use of the various distribution channels in the lodging industry.
Those channels include franchisor reservation systems and toll-free numbers,
travel agent and airline global distribution systems, corporate travel offices
and office managers, and convention and visitor bureaus. Our access to these
channels enables us to maximize revenue yields on a day-to-day basis. We
recruit sales teams locally and those teams receive incentive-based compensation
bonuses. All of our sales managers complete our sales training program.

Strategic Capital Improvements
- ------------------------------

     We and the owners of our properties plan renovations primarily to enhance a
property's appeal to targeted

                                       7



market segments. This is designed to attract new customers and generate
increased revenue and cash flow. For example, in many of our properties, the
banquet and meeting spaces have been renovated and guest rooms have been
upgraded with high speed internet access and comfortable work spaces to better
accommodate the needs of business travelers and to increase average daily rates.
We base recommendations on capital spending decisions on both strategic needs
and potential rate of return on a given capital investment. While we provide
recommendations and supervision of many capital expenditure projects, the owners
of the properties are responsible for funding capital expenditures.

Selective Use of Multiple Brand Names
- -------------------------------------

     We believe the selection of an appropriate franchise brand is essential in
positioning a hotel property optimally within its local market. We select brands
based on local market factors such as local presence of the franchisor, brand
recognition, target demographics and efficiencies offered by franchisors. We
believe our relationships with many major hotel franchisors place us in a
favorable position when dealing with those franchisors and allow us to negotiate
favorable franchise agreements with franchisors. We believe our growth in
acquiring management contracts will further strengthen our relationship with
franchisors.

     The following chart summarizes information on the national franchise
affiliations of our properties as of December 31, 2001:

                                       8





                                     Leased Properties           Managed Properties
                                     -----------------           ------------------
                                  Guest               % of    Guest               % of
                                  -----               ----    ------              ----
        Franchise                 Rooms    Hotels    Rooms    Rooms     Hotels    Rooms
- ------------------------------    -----    ------    -----    ------    ------    -----
                                                                
Hilton(R).                           --       --        --     7,920       29      15.3%
Sheraton(R)...................       --       --        --     6,299       21      12.1%
Independent.................         --       --        --     6,266       28      12.1%
Radisson(R)...................       --       --        --     4,664       16       9.0%
Holiday Inn(R)................      414        2       6.3%    4,439       22       8.6%
Hampton Inn(R)................    1,964       16      29.8%    2,128       17       4.1%
Doubletree(R).................       --       --        --     2,049        7       3.9%
Marriott(R)...................       --       --        --     1,841        5       3.5%
Westin(R). ...................       --       --        --     1,715        6       3.3%
Residence Inn(R)..............      168        1       2.5%    1,641       12       3.1%
Embassy Suites(R).............       --       --        --     1,488        6       2.9%
Crowne Plaza(R)...............       --       --        --     1,395        6       2.7%
Courtyard by Marriott(R)......      607        4       9.2%    1,299        7       2.5%
Holiday Inn Select(R).........       --       --        --     1,244        4       2.4%
Wyndham(R)....................       --       --        --     1,070        4       2.1%
Ramada(R).....................       --       --        --     1,011        6       1.9%
Hilton Garden Inn(R)..........      652        4       9.9%      821        4       1.6%
Comfort Inn(R)................    1,144        8      17.4%      670        4       1.3%
Holiday Inn Express(R)........      208        2       3.2%      637        5       1.2%
Doral(R)......................       --       --        --       575        2       1.1%
Four Points(R)................       --       --        --       338        2       0.7%
Best Western(R)...............       --       --        --       329        3       0.6%
Doubletree Guest Suites(R)....       --       --        --       292        2       0.6%
Renaissance(R)................       --       --        --       289        1       0.6%
Comfort Suites(R).............      215        1       3.3%      238        2       0.5%
Omni(R).......................       --       --        --       215        1       0.4%
Fairfield Inn(R)..............      110        1       1.7%      200        1       0.4%
Quality Suites(R).............      168        1       2.5%      177        1       0.3%
Hilton Suites(R)..............       --       --        --       174        1       0.3%
Quality Inn(R)................       --       --        --       165        1       0.3%
Staybridge Suites(R)..........       --       --        --       108        1       0.2%
Howard Johnson(R).............       --       --        --       100        1       0.2%
Homewood Suites(R)............      795        7      12.1%       83        1       0.2%
Hampton Inn & Suites(R).......      136        1       2.1%       --       --        --
                                  -----    -----     -----    ------    -----     -----
 Total........................    6,581       48     100.0%   51,880      229     100.0%
                                  =====    =====     =====    ======    =====     =====


Emphasis on Food and Beverage
- -----------------------------

     We believe popular food and beverage ideas are a critical component in the
overall success of a full-service hospitality property. We utilize food and
beverage operations to create local awareness of our hotel facilities, to
improve the profitability of our hotel operations, and to enhance customer
satisfaction. We are committed to competing for patrons with restaurants and
catering establishments by offering high-quality restaurants that garner
positive reviews and strong local and/or national reputations. We have engaged
food and beverage experts to develop several proprietary restaurant concepts. We
have also successfully placed nationally recognized food outlets such as Pizza
Hut(R), Starbuck's Coffee(R), "TCBY"(R) Yogurt and TJ Cinnamon(R) in several of
our hotels. We believe popular food concepts will strengthen our ability to
attract business travelers and group meetings and improve the name recognition
of our properties.

                                       9



Commitment to Service and Value
- -------------------------------

     We are dedicated to providing consistent, exceptional service and value to
our customers. We conduct extensive employee training programs to ensure
high-quality, personalized service. We have created and implemented programs to
ensure the effectiveness and uniformity of our employee training. Our practice
of tracking customer comments through guest comment cards, and the direct
solicitation of guest opinions regarding specific items, allows us to target
investment in services and amenities. Our focus on these areas has enabled us to
attract lucrative group business.

Purchasing
- ---------

     We have spent extensive resources to create efficient purchasing programs
that offer the owner of each hotel we manage quality products at very
competitive pricing. These programs are available to all of the properties we
manage. While participation in our purchasing programs is voluntary, we believe
they provide each of our managed hotels with a distinct competitive and economic
edge. In developing these programs, we seek to obtain the best pricing available
for the quality of item or service being sourced, in order to minimize the
operating expenses of the property.

Internet-based Reporting Systems
- --------------------------------

     We employ internet-based reporting systems at each of our properties and at
our Corporate Office to monitor the daily financial and operating performance of
the properties. We have integrated information technology services through
networks at many of the properties. Corporate Office executives utilize
information systems that track each property's daily occupancy, average daily
rates, and revenue from rooms, food and beverage. By having the latest property
operating information available at all times, we are better able to respond to
changes in the market of each property.

Expansion Strategy

     We anticipate we will continue to expand our portfolio by securing
additional management contracts. We attempt to identify properties that are
promising management candidates located in markets with economic, demographic
and supply dynamics favorable to hotel operators. Through our extensive due
diligence process, we select those expansion targets where we believe selected
capital improvements and focused management will increase the property's ability
to attract key demand segments, demonstrate better financial performance, and
increase long-term value. In order to evaluate the relative merits of each
investment opportunity, senior management and individual operations teams create
detailed plans covering all areas of renovation and operation. These plans serve
as the basis for our expansion decisions and guide subsequent renovation and
operating plans.

     We seek to manage properties that meet the following criteria:

Market Criteria
- ---------------

     Economic Growth. We focus on metropolitan areas that are approaching, or
have already entered, periods of economic growth. Such areas generally show
above average growth in the business community as measured by job formation
rates, population growth rates, tourism and convention activity, airport traffic
volume, local commercial real estate occupancy, and retail sales volume. Markets
that exhibit these characteristics typically have strong demand for hotel
facilities and services.

     Supply Constraints. We seek lodging markets with favorable supply dynamics
for property owners and operators. These dynamics include an absence of current
new hotel development and barriers to future development such as zoning
constraints, the need to undergo lengthy local development approval processes,
and a limited number of suitable sites. Other factors limiting the supply of new
hotels are the current lack of financing available for new development and the
inability to generate adequate returns on investment to justify new development.

     Geographic Diversification. Our properties are located in 33 states across
the United States, the District of Columbia and Canada. See "Properties" for
additional information regarding our properties. We seek to maintain a
geographically diverse portfolio of managed properties to offset the effects of
regional economic cycles.

Hotel Criteria
- --------------

     Location and Market Appeal. We seek to operate hotels situated near both
business and leisure centers that generate a broad base of demand for hotel
accommodations and facilities. These demand generators include airports,
convention centers, business parks, shopping centers and other retail areas,
sports arenas and stadiums, major

                                       10



highways, tourist destinations, major universities and cultural and
entertainment centers with nightlife and restaurants. The confluence of nearby
business and leisure centers enables us to attract both weekday business
travelers and weekend leisure guests. Attracting a balanced mix of business,
group and leisure guests to the hotels helps to maintain stable occupancy rates
and high average daily rates.

     Size and Facilities. We seek to operate hotels with 200 to 500 guest rooms
and include accommodations and facilities that are, or are capable of being
made, attractive to key demand segments such as business, group and leisure
travelers. These facilities typically include large, upscale guest rooms; food
and beverage facilities; extensive meeting and banquet space; and amenities such
as health clubs, swimming pools and adequate parking.

     Potential Performance Improvements. We target underperforming hotels where
intensive management and selective capital improvements can increase revenue and
cash flow. These hotels represent opportunities where a systematic management
approach and targeted renovations should result in improvements in revenue and
cash flow.

     We expect our relationships throughout the industry will continue to
provide us with a competitive advantage in identifying, evaluating and managing
hotels that meet our criteria. We have a record of successfully managing the
renovation and repositioning of hotels in situations with varying levels of
service, room rates and market types. We plan to continue to manage such
renovation programs as we acquire new management contracts.

Corporate Housing

     On May 31, 2000, we completed the acquisition of BridgeStreet
Accommodations, Inc. BridgeStreet is a leading provider of corporate housing
services in metropolitan markets located in the United States, Canada and the
United Kingdom. On August 17, 2001, we expanded BridgeStreet into France through
the acquisition of a Paris-based corporate housing company. As of December 31,
2001, our Corporate Housing division had approximately 3,054 apartments under
lease.

Accommodations and Services

Accommodations
- --------------

     Through our BridgeStreet brand, we offer high quality, fully furnished
one-, two- and three-bedroom and larger accommodations. These accommodations,
together with the specialized services we offer, are intended to provide guests
with a "home away from home." We select our BridgeStreet accommodations based on
location, general condition and basic amenities, with the goal of providing
accommodations that meet each guest's particular needs. As a flexible
accommodation services provider, we can satisfy client requests for
accommodations in a variety of locations and neighborhoods, including requests
for proximity to an office, school or area attraction, as well as requests for
accommodations of specific types and sizes. The substantial majority of
BridgeStreet's accommodations are located within high-quality property complexes
that typically feature in-unit washers and dryers, dedicated parking, and access
to fitness facilities, including, in many cases, pools, saunas and tennis
courts. We also are able to customize accommodations at a guest's request with
items such as office furniture, fax machines and computers.

     We lease substantially all of our Corporate Housing accommodations through
flexible, short-term leasing arrangements in order to match our supply of
accommodations with client demand. We believe our flexible leasing strategy
allows us to react to changes in market demand for particular geographic
locations and types of accommodations. Our Corporate Housing management strives
to develop strong relationships with property managers to ensure that we have a
reliable supply of high quality, conveniently located accommodations.

     Our Corporate Housing accommodations generally are priced competitively
with all-suite or upscale extended-stay hotel rooms, even though we believe our
accommodations are substantially larger than those hotel rooms. We believe we
generally are able to price our accommodations competitively due to:

     .    Our high quality accommodations;

                                       11



     .    Our relatively low operating cost structure; and

     .    Our ability to lease accommodations in accordance with demand and
          leave unfavorable markets quickly.

     The length of a guest's stay can range from a few nights to a few years,
with the typical stay ranging from 30 to 45 days.

Corporate Client Services
- -------------------------

     Our goal is to provide valuable, cost-effective services to our corporate
clients. Many of these clients' human resource directors, relocation managers or
training directors have significant, national employee lodging requirements. In
particular, BridgeStreet aims to relieve our clients of the administrative
burden often associated with relocating employees and/or providing them with
temporary housing.

     We believe existing and potential clients will increasingly turn to outside
providers such as BridgeStreet to satisfy their employee lodging requirements as
their awareness of BridgeStreet and the flexible accommodation services industry
increases.

Guest Services
- --------------

     We strive to provide the highest quality of customer service by overseeing
all aspects of a guest's lodging experience, from preparations prior to the
guest's arrival to the moving out process. BridgeStreet maintains a
representative in each city in which it operates to be responsive to guests'
needs. BridgeStreet's guest services department offers guests comprehensive
information services before and during their stays to help guests acclimate
themselves to their new surroundings.

Sales and Marketing

     Our Corporate Housing division focuses primarily on business-to-business
selling. At the local level, each of BridgeStreet's operating subsidiaries has
corporate account specialists that call on local companies, including local
branches of regional or national companies, to solicit business. Each account
specialist focuses their efforts on the key decision makers at each company
responsible for establishing and administering travel and accommodation
policies. These decision makers are typically human resource directors,
relocation managers or training directors. By aggressively pursuing
relationships with potential clients and expanding services to existing clients,
BridgeStreet seeks to become each client's primary or sole provider of flexible
accommodation services nationwide. We operate a global BridgeStreet sales office
to market our worldwide capabilities to our international corporate clients. In
addition, we have expanded BridgeStreet's internet presence to supplement
traditional marketing strategies and to better serve our customers.

     We tailor our marketing strategy to the needs of particular clients. For
example, we may market ourselves to a corporation with relocating employees by
focusing on our ability to situate large families in apartments with three or
more bedrooms, our access to accommodations in both metropolitan and suburban
settings, and our access to accommodations that allow pets. In contrast, when
marketing to potential corporate clients in need of short-term housing, we might
emphasize our flexible lease terms and our ability to customize an accommodation
with amenities such as office equipment, including computers, additional
telephone lines and other work-related items.

     We intend to continue an advertising program designed to enhance the
BridgeStreet name both inside and outside the flexible accommodation services
industry and broaden our client base. In addition, we promote our BridgeStreet
brand name by advertising in trade publications, Chamber of Commerce listings,
local visitor magazines and telephone directories and the Internet, and through
periodic direct mail campaigns.

Expansion Strategies

                                       12



Local Market Share
- ------------------

     We have offices in many markets that offer significant opportunity for
expansion. Since our May 2000 acquisition of BridgeStreet, we have trained all
of our BridgeStreet sales employees in our sales and marketing techniques. We
believe this training will allow us to expand our sales in these markets. With a
better-trained sales force and our management experience, we believe we will be
in a better position to penetrate local markets and increase our market share.

National Accounts
- -----------------

     We believe national accounts have substantial growth potential for
BridgeStreet. BridgeStreet's current customers include a significant number of
large national companies who utilize BridgeStreet's services in a limited, but
loyal, manner. We plan to maximize sales to those existing corporate clients and
to obtain new clients. We intend to use a national sales and marketing program
that promotes the BridgeStreet brand and highlights BridgeStreet's expanding
national and international network, as well as BridgeStreet's ability to serve
as a central point of contact on all issues. Many of BridgeStreet's clients are
Fortune 2000 companies with significant national and international employee
lodging requirements.

Network Partner Relationships
- -----------------------------

     We have developed a network partner relationship with flexible
accommodation service providers in the United States and in 39 countries
worldwide. Through network partner agreements, BridgeStreet has expanded the
number of locations where it can serve our clients' needs. In some additional
markets, BridgeStreet intends to enter into network partner agreements with one
or more leading local or regional flexible accommodation service providers
having the size and quality of operations suitable for serving BridgeStreet's
client base.

Other Business Information

Employees

     As of December 31, 2001, we employed approximately 20,300 persons, of whom
approximately 17,100 were compensated on an hourly basis. Some of the employees
at 21 of our hotels are represented by labor unions. We believe that labor
relations with our employees are generally good.

Franchises

     We employ a flexible branding strategy based on each particular property's
market environment and other unique characteristics. Accordingly, we use various
national trade names pursuant to licensing arrangements with national
franchisors.

Governmental Regulation

     A number of states regulate the licensing of hospitality properties and
restaurants, including liquor licensing, by requiring registration, disclosure
statements and compliance with specific standards of conduct. We believe that we
are substantially in compliance with these requirements. Managers of hospitality
properties are also subject to laws governing their relationship with employees,
including minimum wage requirements, overtime, working conditions and work
permit requirements. Compliance with, or changes in, these laws could reduce the
revenue and profitability of our properties and could otherwise adversely affect
our operations.

Americans with Disabilities Act.
- --------------------------------

     Under the Americans with Disabilities Act, all public accommodations are
required to meet certain requirements related to access and use by disabled
persons. These requirements became effective in 1992. Although significant
amounts have been and continue to be invested in federally required upgrades to
our properties and units leased by

                                       13



BridgeStreet, a determination that we are not in compliance with the Americans
with Disabilities Act could result in a judicial order requiring compliance,
imposition of fines or an award of damages to private litigants. We are likely
to incur additional costs of complying with the Americans with Disabilities Act.
Those costs, however, are not expected to have a material adverse effect on our
results of operations or financial condition.

Environmental Laws.
- -------------------

     Under various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real property may be
liable for the costs of removal or remediation of hazardous or toxic substances
on, under or in such property. Such laws often impose liability whether or not
the owner or operator knew of, or was responsible for, the presence of such
hazardous or toxic substances. In addition, the presence of hazardous or toxic
substances, or the failure to remediate such property properly, may adversely
affect the owner's ability to use the property, sell the property or borrow by
using such real property as collateral. Persons who arrange for the disposal or
treatment of hazardous or toxic substances may also be liable for the costs of
removal or remediation of such substances at the disposal or treatment facility,
whether or not such facility is or ever was owned or operated by such person.
The operation and removal of underground storage tanks are also regulated by
federal and state laws. In connection with the operation of our properties, we
could be liable for the costs of remedial action with respect to such regulated
substances and storage tanks and claims related thereto. Environmental laws and
common law principles could also be used to impose liability for releases of
hazardous materials, including asbestos-containing materials, into the
environment, and third parties may seek recovery from owners or operators of
real properties for personal injury associated with exposure to released
asbestos-containing materials or other hazardous materials.

     Phase I environmental site assessments have been conducted at all of the
hotels owned by MeriStar Hospitality, and Phase II environmental site
assessments have been conducted at some of these hotels by qualified independent
environmental engineers. The purpose of the environmental site assessments is to
identify potential sources of contamination for which we may be responsible and
to assess the status of environmental regulatory compliance. These assessments
have not revealed any environmental liability or compliance concerns that we
believe would have a material adverse effect on our business, assets, results of
operations or liquidity, nor are we aware of any material environmental
liability or concerns. Nevertheless, it is possible that these environmental
site assessments did not reveal all environmental liabilities or compliance
concerns or that material environmental liabilities or compliance concerns exist
of which we are currently unaware.

     In reliance upon the Phase I and Phase II environmental site assessments,
we believe the hotels owned by MeriStar Hospitality are in material compliance
with all federal, state and local ordinances and regulations regarding hazardous
or toxic substances and other environmental matters. We have not been notified
by any governmental authority of any material noncompliance, liability or claim
relating to hazardous or toxic substances or other environmental substances in
any of the properties we lease or manage.

Other regulation.
- -----------------

     As a lessee of its accommodations, our Corporate Housing division believes
that it and its employees are either outside the purview of, exempted from or in
compliance with laws in the jurisdictions in which BridgeStreet operates
requiring real estate brokers to hold licenses. However, there can be no
assurance that BridgeStreet's position in any jurisdiction where it believes
itself to be excepted or exempted would be upheld if challenged or that any such
jurisdiction will not amend its laws to require BridgeStreet and/or one or more
of its employees to be licensed brokers. Moreover, there can be no assurance
that BridgeStreet will not operate in the future in additional jurisdictions
requiring such licensing.

     In some of the jurisdictions in which BridgeStreet operates, we believe
that we are not required to charge guests the sales and "bed" taxes that are
applicable to establishments furnishing rooms to transient guests. We cannot
provide assurance, however, that the tax laws in particular jurisdictions will
not change or that a tax collection agency will not successfully challenge
BridgeStreet's position regarding the applicability of tax laws. We believe we
properly charge and remit such taxes in all jurisdictions where we are required
to do so.

                                       14



Competition

     We compete primarily in the following segments of the lodging industry: the
upscale and mid-priced sectors of the full-service segment; the limited-service
segment; and resorts. We also compete with other providers of flexible
accommodation services. Other full- and limited-service hotels and resorts
compete with our properties in each geographic market in which our properties
are located. Competition in the United States lodging industry is based on a
number of factors, most notably convenience of location, brand affiliation,
price, range of services and guest amenities or accommodations offered, and
quality of customer service and overall product.

     In addition, we compete for hotel management contracts against numerous
competitors, many of which have more financial resources than us. These
competitors include the management arms of some of the major hotel brands as
well as independent, non-brand affiliated hotel managers.

The Operating Partnership

     The following summary information is qualified in its entirety by the
provisions of the MeriStar H&R Operating Company, L.P. limited partnership
agreement. We have filed a copy of the agreement as an exhibit to this Form
10-K.

     MeriStar H&R Operating Company, L.P., our subsidiary operating partnership,
indirectly holds substantially all of our assets. We are the sole general
partner of that partnership. We, one of our directors and approximately 85
independent third-parties are limited partners of that partnership. The
partnership agreement gives the general partner full control over the business
and affairs of the partnership. The agreement also gives us, as general partner,
the right, in connection with the contribution of property to the partnership or
otherwise, to issue additional partnership interests in the partnership in one
or more classes or series. These interests may have such designations,
preferences and participating or other special rights and powers, including
rights and powers senior to those of the existing partners, as we may determine.

     The partnership agreement currently has three classes of limited
partnership interests: Class A units, Class B units and Preferred units. As of
March 5, 2002, the ownership of the limited partnership units was as follows:

     .    We and our wholly-owned subsidiaries own a number of Class A units
          equal to the number of outstanding shares of our common stock; and

     .    Other limited partners own 543,539 Class A units, 1,275,607 Class B
          units and 392,157 Preferred units.

     We did not make any distributions during 2001, 2000 or 1999 to the holders
of the Class A units and Class B units. Holders of preferred units receive a
6.5% cumulative annual preferred return based on a capital amount of $3.34 per
unit compounded quarterly to the extent not paid currently. All net income and
capital proceeds received by the partnership, after payment of the annual
preferred return and, if applicable, the liquidation preference, will be shared
by the holders of the Class A units and Class B units in proportion to the
number of units owned by each holder.

     The holders of each Class A or Class B unit not held by us or one of our
subsidiaries is redeemable for cash equal to the value of one share of our
common stock or, at our option, one share of our common stock. Until April 1,
2004, the partnership may redeem the Preferred units for cash at a price of
$3.34 per unit or with the holder's consent for our common stock having
equivalent aggregate value. After April 1, 2004, each holder of the Preferred
units may require the partnership to redeem these units for cash at a price of
$3.34 per unit or, at the holder's option, shares of our common stock having
equivalent aggregate value. If we or the holders of the Preferred units chose to
redeem the Preferred units for our common stock instead of cash, and if our
common stock was valued at that time at less than $3.34 per share, we would have
to issue more shares of our common stock than the number of Preferred units
being redeemed. For example, at December 31, 2001, our stock price was $0.69 per
share. If the Preferred units were redeemed for common stock at that date, we
would have issued 1,898,267 shares of our common stock, which would have
represented approximately 4.9% of our then outstanding common stock, with
respect to 392,157

                                       15



Preferred units then outstanding.

                                       16



RISK FACTORS

Financing Risks

Restrictions imposed by our debt agreements may limit our ability to execute our
business strategy and increase the risk of default under our debt obligations.

     Our senior secured credit facility and other indebtedness contain a number
of covenants, including requirements to maintain financial ratios, which may
significantly limit our ability to, among other things:

     .    borrow additional money;

     .    make capital expenditures and other investments;

     .    pay dividends;

     .    merge, consolidate or dispose of assets; and

     .    incur additional liens.

     While we believe our current business plan and outlook provide sufficient
liquidity to fund our operations, a significant decline in our operations could
reduce our cash from operations and cause us to be not in compliance with other
covenants in our debt agreements, leaving us unable to use our senior credit
facility to supply needed liquidity.

Our credit facilities mature during 2003. If we are unable to refinance or
extend the maturities of these credit facilities, our continuing operations
could suffer.

     Our senior secured credit facility, as amended in January 2002, matures in
February 2003. As of February 15, 2002, we had approximately $82.5 million of
outstanding indebtedness under that facility. Our revolving credit facility with
MeriStar Hospitality matures 91 days after our senior secured credit facility
matures. As of February 15, 2002, we had approximately $44.0 million of
outstanding indebtedness under the MeriStar Hospitality facility. In addition,
we have a $13.1 million note payable to MeriStar Hospitality, which matures on
the same date as the MeriStar Hospitality facility

     We plan to refinance or negotiate an extension of the maturity of our
senior secured credit facility. However, our ability to complete such a
transaction is subject to a number of conditions, many of which are beyond our
control. For example, if there were a further disruption in the financial
markets because of a terrorist attack or other event, we may be unable to access
the financial markets. Failure to complete a refinancing or extension of the
senior secured credit facility would have a material adverse effect on our
company.

We have limited additional availability under our credit facilities.

     Our principal sources of liquidity have been our credit facilities and cash
flow from operations. As of February 15, 2002, we had no availability for
further borrowings under our senior credit facility and approximately $6.0
million of availability under the MeriStar Hospitality Facility. On February 28,
2002 we made a required payment of $2.5 million on our senior credit facility.
In addition, the availability under the senior credit facility will decrease by
$2.5 million on June 30, 2002, September 30, 2002 and December 31, 2002. Our
cash flow from operations is subject to a number of risks, including those set
forth below under "Operating Risks." If our cash flow and capital resources are
insufficient to fund our cash needs, which include debt service, we may be
forced to reduce or delay capital expenditures, sell material assets or
operations, obtain additional capital or restructure our indebtedness. In the
event we are required to dispose of material assets or operations, we may not be
able to do so on terms that are acceptable to us. Failure to meet our cash needs
would have a material adverse effect on our company.


Our failure to meet the NYSE's continued listing standards could negatively
impact our ability to raise future capital and could make it more difficult for
investors to obtain quotations or trade our stock.

     We have received notification from the NYSE that we are not in compliance
with the continued listing standards of the NYSE because our average closing
share price was less than $1.00 over a consecutive 30-day trading period. The
NYSE's continued listing standards require that we bring our 30-day average
closing price and our share price above $1.00 by June 20, 2002, subject to
certain conditions. Although management is actively seeking to remedy the
problem, we may not be able to resolve the problem in a timely fashion or at
all. If we fail to comply with the listing requirements, our common stock might
be delisted by the NYSE. Delisting from the NYSE would adversely affect the
liquidity of our common stock and our ability to raise additional capital
through a sale of our common stock.

                                       17



Operating Risks

If our performance was negatively affected by one or more of a variety of risks
related to the lodging industry, our results of operations could suffer.

     Various factors could adversely affect our ability to generate revenues on
which our management fee will be based. Our business is subject to all of the
operating risks inherent in the lodging industry. These risks include the
following:

     .    changes in general and local economic conditions;

     .    cyclical overbuilding in the lodging industry;

     .    varying levels of demand for rooms and related services;

     .    competition from other hotels, motels and recreational properties,
          some of which may have greater marketing and financial resources than
          us or the owners of the properties we manage;

     .    dependence on business and commercial travelers and tourism, which may
          fluctuate and be seasonal;

     .    decreases in air travel;

     .    fluctuations in operating costs;

     .    the recurring costs of necessary renovations, refurbishment and
          improvements of hotel properties;

     .    changes in governmental regulations that influence or determine wages,
          prices and construction and maintenance costs; and

     .    changes in interest rates and the availability of credit.

     Demographic, geographic or other changes in one or more of our markets
could impact the convenience or desirability of the sites of some hotels or
guest accommodation apartments, which would in turn affect the operations of
those hotels or flexible accommodations. In addition, due to the level of fixed
costs required to operate full-service hotels, significant expenditures
necessary for the operation of hotels generally cannot be reduced when
circumstances cause a reduction in revenue.

The recent economic slowdown has adversely affected the performance of our
hotels and, if it worsens or continues, these effects could be material.

     The economic slowdown and the resulting declines in revenue per available
room at the hotels we manage began in March 2001. These trends are currently
continuing. The decline in occupancy during the second, third and fourth
quarters of 2001 has led to declines in room rates as hotels compete more
aggressively for guests. If the current economic slowdown worsens significantly
or continues for a protracted period of time, the declines in occupancy could
also lead to further declines in average daily room rates and could have a
material adverse effect on our EBITDA and operating results.

Acts of terrorism, the threat of terrorism and the ongoing war against terrorism
have impacted and will continue to impact our industry and our results of
operations.

     The terrorist attacks of September 11, 2001 have had a negative impact on
our hotel operations in the third and fourth quarters causing lower than
expected performance in an already slowing economy. The events of September 11
have caused a significant decrease in our hotels' occupancy and average daily
rate due to disruptions in business and leisure travel patterns, and concerns
about travel safety. Major metropolitan area and airport hotels have been
adversely affected due to concerns about air travel safety and a significant
overall decrease in the amount of air

                                       18



travel.

     The September 11 terrorist attacks were unprecedented in scope, and in
their immediate, dramatic impact on travel patterns. We have not previously
experienced such events, and it is currently not possible to accurately predict
if and when travel patterns will be restored to pre-September 11 levels. While
we have had improvements in our operating levels from the period immediately
following the attacks, we believe the uncertainty associated with subsequent
incidents, threats and the possibility of future attacks will continue to hamper
business and leisure travel patterns for the next several quarters.

The lodging business is seasonal.

     Generally, hotel revenues are greater in the second and third calendar
quarters than in the first and fourth calendar quarters. This may not be true,
however, for hotels in major tourist destinations. Revenues for hotels in
tourist areas generally are substantially greater during tourist season than
other times of the year. Because of the September 11 events, our operating
results for the third and fourth quarters of 2001 were lower than expected.
Seasonal variations in revenue at the hotels we lease or manage will cause
quarterly fluctuations in our revenues. Events beyond our control, such as
extreme weather conditions, economic factors and other considerations affecting
travel may also adversely affect our earnings.

We may be adversely affected by the limitations in our franchising and licensing
agreements.

     The franchise agreements under which we operate and manage hotels generally
contain specific standards for, and restrictions and limitations on, the
operation and maintenance of a hotel in order to maintain uniformity within the
franchisor system. Those limitations may conflict with our philosophy, which is
shared with MeriStar Hospitality, of creating specific business plans tailored
to each hotel and to each market. Standards are often subject to change over
time, in some cases at the discretion of the franchisor, and may restrict a
franchisee's ability to make improvements or modifications to a hotel without
the consent of the franchisor. In addition, compliance with standards could
require a hotel owner to incur significant expenses or capital expenditures.
Action or inaction on our part or by the owner of one of our hotels could result
in a breach of standards or other terms and conditions of the franchise
agreements, and could result in the loss or cancellation of a franchise license.
Loss of franchise licenses without replacement would likely have an adverse
effect on our revenues. In connection with terminating or changing the franchise
affiliation of a hotel, the owner of the hotel may be required to incur
significant expenses or capital expenditures. Moreover, the loss of a franchise
license could have a material adverse effect upon the operation or the
underlying value of the hotel covered by the franchise due to the loss of
associated name recognition, marketing support and centralized reservation
systems provided by the franchisor. Franchise agreements covering the hotels
managed or leased by us expire or terminate, without specified renewal rights,
at various times and have differing remaining terms. As a condition to renewal,
these franchise agreements frequently contemplate a renewal application process.
This process may require an owner to make substantial capital improvements to a
hotel. Although our management agreements generally require owners to make
capital improvements to maintain the quality of a property, we do not directly
control the timing or amount of those expenditures.

The lodging industry and flexible accommodation service market are highly
competitive.

     We have no single competitor or small number of competitors that are
dominant in our business. We operate in areas that contain numerous competitors,
some of which may have substantially greater resources than us or the owners of
our properties. Competition in the lodging industry is based generally on
location, availability, room rates or accommodations prices, range and quality
of services and guest amenities offered. New or existing competitors could
significantly lower rates; offer greater conveniences, services or amenities; or
significantly expand, improve or introduce new facilities in markets in which we
compete. All of these factors could adversely affect our operations and the
number of suitable business opportunities. In addition, we compete for hotel
management contracts against numerous competitors, many of which have more
financial resources than us. These competitors include the management arms of
some of the major hotel brands as well as independent, non-brand affiliated
hotel managers.

                                       19



Our leasing arrangements may not match demand for services in our markets.

     Our Corporate Housing division, which provides flexible accommodation
services, intends to continue to lease substantially all of its accommodations
through flexible, short-term leasing arrangements with property managers. Our
goal is to match our supply of accommodations with client demand. Because our
only access to apartment communities will be through leasing arrangements, the
Corporate Housing division will be dependent upon relationships with property
managers in order to conduct our operations effectively. We will strive to
develop strong relationships with property managers to ensure we have a reliable
supply of high-quality, conveniently-located accommodations. In the event these
relationships were to deteriorate or fail to develop, the Corporate Housing
division might not be able to satisfactorily meet client demand requirements. In
addition, as we obtain our supply of accommodations through leases with typical
terms of between one and 12 months, we may not be able to react immediately to
sudden changes in consumer demand, such as that which occurred after the
September 11 attacks, by decreasing or increasing our inventory of
accommodations. Failure to maintain good relationships with property managers
and increased volatility in consumer demand could negatively impact our results
of operations.

Costs of compliance with environmental laws could adversely affect our operating
results.

     Under various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real property may be
liable for the costs of removal or remediation of hazardous or toxic substances.
These laws often impose liability whether or not the owner or operator knew of,
or was responsible for, the presence of hazardous or toxic substances. In
addition, the presence of contamination from hazardous or toxic substances, or
the failure to properly remediate contaminated property, may adversely affect
the owner's ability to sell or rent the property or to borrow using the property
as collateral. Persons who arrange for the disposal or treatment of hazardous or
toxic substances may also be liable for the costs of removal or remediation of
such substances at the disposal or treatment facility, whether or not that
facility is or ever was owned or operated by that person. The operation and
removal of underground storage tanks are also regulated by federal and state
laws. In connection with the ownership and operation of hotels, we or the owners
of our properties could be held liable for the costs of remedial action for
regulated substances and storage tanks and related claims. Activities have been
undertaken to close or remove storage tanks located on the property of several
of the hotels that we lease or manage.

     Substantially all of the hotels we lease or manage have undergone Phase I
environmental site assessments, which generally provide a nonintrusive physical
inspection and database search, but not soil or groundwater analyses, by a
qualified independent environmental engineer. The purpose of a Phase I is to
identify potential sources of contamination for which the hotels may be
responsible and to assess the status of environmental regulatory compliance. The
Phase I assessments have not revealed any environmental liability or compliance
concerns that we believe would have a material adverse effect on our results of
operations or financial condition, nor are we aware of any material
environmental liability or concerns. Nevertheless, it is possible that these
environmental site assessments did not reveal all environmental liabilities or
compliance concerns or that material environmental liabilities or compliance
concerns exist of which we are currently unaware.

     In addition, substantially all of the hotels we lease or manage have been
inspected to determine the presence of asbestos. Federal, state and local
environmental laws, ordinances and regulations also require abatement or removal
of asbestos-containing materials and govern emissions of and exposure to
asbestos fibers in the air. Asbestos-containing materials are present in various
building materials such as sprayed-on ceiling treatments, roofing materials or
floor tiles at some of the hotels. Operations and maintenance programs for
maintaining asbestos-containing materials have been or are in the process of
being designed and implemented, or the asbestos-containing materials have been
scheduled to be or have been abated, at these hotels. Any liability resulting
from non-compliance or other claims relating to environmental matters could have
a material adverse effect on our results of operations or financial condition.

Aspects of our operations are subject to government regulation, and changes in
regulations may have significant effects on our business.

                                       20



     A number of states regulate the licensing of hotels and restaurants,
including liquor licensing, by requiring registration, disclosure statements and
compliance with specific standards of conduct. We believe we are substantially
in compliance with these requirements or, in the case of liquor licenses, that
we have or will promptly obtain the appropriate licenses. Managers of hotels and
providers of flexible accommodation services are also subject to employment
laws, including minimum wage requirements, overtime, working conditions and work
permit requirements. Compliance with, or changes in, these laws could reduce the
revenue and profitability of our hotels and corporate housing units and could
otherwise adversely affect our results of operations or financial condition.

     Under the Americans with Disabilities Act, or ADA, all public
accommodations are required to meet federal requirements related to access and
use by disabled persons. These requirements became effective in 1992. Although
owners of hotels we manage have invested significant amounts in ADA-required
upgrades, a determination that the hotels we lease or manage or the units leased
by our Corporate Housing division are not in compliance with the ADA could
result in a judicial order requiring compliance, imposition of fines or an award
of damages to private litigants.

A high concentration of the hotels we manage or lease are in the upscale,
full-service segment, and our Corporate Housing division primarily services
business travelers, so we may be more susceptible to an economic downturn.

     Approximately 85% of the rooms our Hotel Management division currently
manages or leases are in hotels that are in the upper-upscale, full-service
segment. This hotel segment generally permits higher room rates. However, in an
economic downturn, hotels in this segment may be more susceptible to a decrease
in revenues, as compared to hotels in other segments that have lower room rates.
This characteristic may result from hotels in this segment generally targeting
business and high-end leisure travelers. In periods of economic difficulties,
business and leisure travelers may seek to reduce travel costs by limiting trips
or seeking to reduce costs on their trips. Our Corporate Housing division, which
primarily services business travelers, is sensitive to economic conditions for
the same reasons. Adverse changes in economic conditions could have a material
adverse effect on our revenues and results of operations.

Other Risks

If we are unable to pursue new growth opportunities through our relationship
with MeriStar Hospitality, our hotel management business could be negatively
affected.

     Because of the terms of our intercompany agreement with MeriStar
Hospitality, we will be highly dependent on MeriStar Hospitality. If MeriStar
Hospitality in the future fails to qualify as a real estate investment trust,
that could have a substantial adverse effect on those aspects of our business
operations and business opportunities that depend on MeriStar Hospitality. For
example, if MeriStar Hospitality ceases to qualify as a real estate investment
trust, the requirement in the intercompany agreement that MeriStar Hospitality
enter into management agreements with us would cease. In that case, MeriStar
Hospitality would have the right to operate a newly acquired property itself.
We, however, would remain subject to all of the limitations on our operations
contained in the existing management agreements. In addition, although we
anticipate that the management agreements involving us generally will be
assigned to any person or entity acquiring the fee or leasehold interest in a
hotel property from MeriStar Hospitality or its affiliates, we could lose our
rights under any such management agreement upon the expiration of the agreement.
The likelihood of a sale of the hotel properties could possibly increase if
MeriStar Hospitality fails to qualify as a real estate investment trust. In
addition, if there is a change in the Internal Revenue Code that would permit
MeriStar Hospitality or one of its affiliates to operate hotels without
adversely affecting MeriStar Hospitality's status as a real estate investment
trust, MeriStar Hospitality would not be required to enter into future renewals
of its management agreements. Furthermore, a change in control of MeriStar
Hospitality could have the same effect as a sale of all of the MeriStar
Hospitality hotel properties, and our working relationship with the new owner of
those hotels may not be as close as our working relationship with MeriStar
Hospitality.

     Also, if we and MeriStar Hospitality do not negotiate a mutually
satisfactory management arrangement within approximately 30 days after MeriStar
Hospitality provides the hotel management subsidiary with written notice of the
management opportunity, MeriStar Hospitality may offer the opportunity to others
for a period of one year before it must again offer the opportunity to us.

                                       21



Our relationship with MeriStar Hospitality Corporation may lead to general
conflicts of interests that adversely affect our shareholders' interests.

     We have historically had a close business relationship with MeriStar
Hospitality. We and MeriStar Hospitality have five common board members and five
common senior executives. Our relationship with MeriStar Hospitality is governed
by an intercompany agreement. That agreement restricts each party from taking
advantage of some business opportunities without first presenting those
opportunities to the other party.

     In its relationship with us, MeriStar Hospitality may have conflicting
views on the manner in which we operate and manage their hotels, as well as
lease arrangements, acquisitions and dispositions. As a result, our directors
and senior executives, who may serve in similar capacities at MeriStar
Hospitality, may well be presented with several decisions which provide them the
opportunity to benefit MeriStar Hospitality to our detriment or benefit us to
the detriment of MeriStar Hospitality. Inherent potential conflicts of interest
will be present in all of the numerous transactions among us and MeriStar
Hospitality.

We have restrictions on our business and on our future opportunities that could
affect our operations.

     So long as the intercompany agreement with MeriStar Hospitality is in
effect, we are prohibited from making real property investments that a REIT
could make unless:

     .    MeriStar Hospitality is first given the opportunity, but elects not to
          pursue the investments;

     .    The investment is on land already owned or leased by us or subject to
          a lease or purchase option in favor of us;

     .    We will operate the property under a trade name owned by us; or

     .    The investment is a minority investment made as part of a lease or
          management agreement arrangement by us.

     The intercompany agreement will generally grant us the right of first
refusal to become the manager of any real property acquired by MeriStar
Hospitality. MeriStar Hospitality will make such an opportunity available to us
only if MeriStar Hospitality determines that:

     .    Consistent with its status as a REIT, MeriStar Hospitality must enter
          into a management agreement with an unaffiliated third party with
          respect to the property;

     .    We are qualified to be the manager of that property; and

     .    MeriStar Hospitality decides not to have the property operated by the
          owner of a hospitality trade name under that trade name.

     Because of the provisions of the intercompany agreement, we are restricted
in the nature of our business and the opportunities we may pursue.

     The terms of the intercompany agreement were not negotiated on an
arm's-length basis. Because the two companies share some of the same executive
officers and directors, there is a potential conflict of interest with respect
to the enforcement and termination of the intercompany agreement to our benefit
and to the detriment of MeriStar Hospitality, or to the benefit of MeriStar
Hospitality and to our detriment. Furthermore, because of the independent
trading of the two companies, stockholders in each company may develop divergent
interests that could lead to conflicts of interest. The divergence of interests
could also reduce the anticipated benefits of our close relationship with
MeriStar Hospitality.

We may have conflicts relating to sale of hotels subject to management
agreements

                                       22



     MeriStar Hospitality will generally be required to pay a termination fee to
us if it elects to sell or transfer a hotel to a person or entity that is not an
affiliate of MeriStar Hospitality or if it elects to permanently close a hotel
after a casualty and does not replace it with another hotel with a management
fee equal to that payable under the management agreement to be terminated. Where
applicable, the termination fee will equal the present value of the management
fees payable during the remainder of the existing term of the management
agreement (discounted using a 10% discount rate), based on fees payable during
the previous twelve months. MeriStar Hospitality's decision to sell a hotel may,
therefore, have significantly different consequences for us and MeriStar
Hospitality.

We rely on the knowledge and experience of some key personnel, and the loss of
these personnel may have a material adverse effect on our operations.

     We place substantial reliance on the lodging industry knowledge and
experience and the continued services of our senior management, led by Paul W.
Whetsell and John Emery. While we believe that, if necessary, we could find
replacements for these key personnel, the loss of their services could have a
material adverse effect on our operations. In addition, Messrs. Whetsell and
Emery are currently engaged, and in the future will continue to engage, in the
management of MeriStar Hospitality. Messrs. Whetsell and Emery may experience
conflicts of interest in allocating management time, services and functions
between MeriStar Hospitality and us.

Our shareholder rights plan and the anti-takeover defense provisions of our
charter documents may deter potential acquirors and depress our stock price.

     Under our shareholder rights plan, holders of our common stock are entitled
to one preferred share purchase right for each outstanding share of common stock
they hold, exercisable under certain defined circumstances involving a potential
change of control. The preferred share purchase rights have the anti-takeover
effect of causing substantial dilution to a person or group that attempts to
acquire us on terms not approved by our board of directors. Those provisions
could have a material adverse effect on the premium that potential acquirors
might be willing to pay in an acquisition or that investors might be willing to
pay in the future for shares of our common stock. For a more complete
description of our shareholder rights plan, please refer to the description of
the plan contained in our registration statement on Form S-4, filed with the SEC
on April 28, 2000, file No. 333-35890, under the caption "Certain Antitakeover
Provisions of MeriStar."

     Provisions of Delaware law and of our charter and by-laws may have the
effect of discouraging a third party from making an acquisition proposal for our
company. These provisions could delay, defer or prevent a transaction or a
change in control of our company under circumstances that could otherwise give
the holders of our common stock the opportunity to realize a premium over the
then-prevailing market prices of our common stock. These provisions include the
following:

     .    we are able to issue preferred shares with rights senior to its common
          stock;

     .    our bylaws prohibit action by written consent of our stockholders, and
          stockholders may not call special meetings;

     .    our certificate of incorporation and bylaws provide for a classified
          board of directors;

     .    removal of directors only for cause and upon the vote of two-thirds of
          the outstanding shares of our common stock; and

     .    our bylaws require advance notice for nomination of directors and for
          shareholder proposals.

                                       23



FORWARD-LOOKING INFORMATION

     Certain information both included and incorporated by reference in this
annual report on Form 10-K may contain forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act
and as such may involve known and unknown risks, uncertainties and other factors
which may cause our actual results, performance or achievements to be materially
different from future results, performance or achievements expressed or implied
by such forward-looking statements. Forward-looking statements, which are based
on certain assumptions and describe our future plans, strategies and
expectations are generally identifiable by use of the words "may," "will,"
"should," "expect," "anticipate," "estimate," "believe," "intend" or "project"
or the negative of them or other variations of them or comparable terminology.
Factors which could have a material adverse effect on our operations and future
prospects include, but are not limited to:

          .    the current slowdown of the national economy;

          .    economic conditions generally and the real estate market
               specifically;

          .    the impact of the September 11, 2001 terrorist attacks or actual
               or threatened future terrorist incidents;

          .    legislative/regulatory changes (including changes to laws
               governing the taxation of REITs);

          .    availability of debt and equity capital;

          .    interest rates;

          .    competition; and

          .    supply and demand for lodging facilities in our current and
               proposed market areas.

     These risks and uncertainties should be considered in evaluating any
forward-looking statements contained or incorporated by reference in this annual
report on Form 10-K.

     We undertake no obligation to update or revise publicly any forward-looking
statement, whether as a result of new information, future events, or otherwise,
other than as required by law.

ITEM 2. PROPERTIES

     We maintain our Corporate headquarters in Washington, D.C. We also have
other corporate offices in North Carolina and Texas. We lease our offices. In
addition our Corporate Housing division leases administrative offices in the
majority of the markets in which they operate in the United States, Canada, the
United Kingdom and Paris, France. We lease and/or manage hotel properties and
golf courses throughout the United States and Canada. No one leased or managed
hotel property is material to our operations.

     The full-service hotels we manage generally feature comfortable, modern
guest rooms, extensive meeting and convention facilities and full-service
restaurant and catering facilities. These facilities are designed to attract
meeting and convention functions from groups and associations, upscale business
and vacation travelers, and banquets and receptions from the local community.
The following tables set forth operating information with respect to the
properties we leased as of December 31:

             Number of     Guest
             ---------    ------
Year         Properties    Rooms     ADR     Occupancy   RevPAR
- ----         ----------   ------   -------   ---------   ------
2001.....       48         6,581    $80.22     63.6%     $51.03
2000.....      157        35,141   $102.38     71.4%     $73.11
1999.....      161        35,655    $96.24     71.4%     $68.74

     The following table summarizes operating information for the properties we
managed as of December 31:

                                       24



           Number of     Guest
           ---------     -----
Year      Properties     Rooms
- ----      ----------     -----
2001.....    229        51,880
2000.....     59        12,172
1999.....     54         9,693

     The following table sets forth operating information with respect to our
Corporate Housing division for the year ended December 31:

                        Average
                        -------
                         Number
                         ------
            Number of      of
            ---------      --
Year         Markets     Units    ADR      Occupancy
- ----         -------     -----    ---      ---------

2001.....      21        3,589    $84.47      85.3%
2000.....      22        3,231    $83.80      88.4%

ITEM 3. LEGAL PROCEEDINGS

     In the normal course of business activities, various lawsuits, claims and
proceedings have been or may be instituted or asserted against us. Based on
currently available facts, we believe that the disposition of matters pending or
asserted will not have a material adverse effect on our consolidated financial
position, results of operations or liquidity.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     We did not submit any matters to a vote of security holders during the
fourth quarter of 2001.

                                       25



                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     Our common stock is listed on the NYSE under the symbol "MMH." As of March
5, 2002, 37,188,574 shares of our common stock were issued and outstanding, held
by approximately 1,049 record holders.

     The following table lists, for the fiscal quarters indicated, the range of
high and low intra-day sale prices per share of our common stock in U.S.
dollars, as reported on the NYSE Composite Transaction Tape.

                                                         High     Low
Fiscal 2000
  First Quarter........................................  $3.44   $2.63
  Second Quarter.......................................   3.13    2.69
  Third Quarter........................................   3.13    2.44
  Fourth Quarter.......................................   2.69    2.06
Fiscal 2001
  First Quarter........................................  $2.71   $1.60
  Second Quarter.......................................   2.14    1.49
  Third Quarter........................................   1.85    0.87
  Fourth Quarter.......................................   0.98    0.54
Fiscal 2002
  First Quarter (through March 5, 2002)................  $0.84   $0.65

     The last reported sale price of our common stock on the NYSE on March 5,
2002 was $0.70.

     In December 2001, we received notification from the NYSE that we were not
in compliance with the continued listing standards of the NYSE because our
average closing share price was less than $1.00 over a consecutive 30-day
trading period. The NYSE's continued listing standards require that we bring our
30-day average closing price and our share price above $1.00 by June 20, 2002,
subject to certain conditions. We are currently evaluating our alternatives with
regard to complying with this standard.

     We have not paid any cash dividends on our common stock and we do not
anticipate that we will do so in the foreseeable future. We intend to retain
earnings to provide funds for the continued growth and development of our
business. The agreements governing our outstanding indebtedness restrict our
ability to pay dividends. Any determination to pay cash dividends in the future
will be at the discretion of the Board of Directors and will be dependent upon
our results of operations, financial condition, contractual restrictions and
other factors deemed relevant by the Board of Directors.

Recent Sales of Unregistered Securities

     On April 15, 1999, we privately issued 1,818,182 shares of our common stock
at a price of $2.75 per share to our joint venture partner in MIP Lessee, L.P.
On January 6, 2000, we privately issued an additional 1,818,182 shares of our
common stock at a price of $2.75 per share to our joint venture partner in MIP
Lessee, L.P.

ITEM 6. SELECTED FINANCIAL DATA

     The following table sets forth our selected historical financial
information. We have extracted the selected operating results and balance sheet
data from our consolidated financial statements for each of the periods
presented. The following information should be read in conjunction with our
consolidated financial statements and notes and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this Annual Report on Form 10-K.

                                       26





                                                                                   Year Ended December  31,
                                                               ----------------------------------------------------------------
                                                                  2001          2000          1999          1998         1997
                                                               ---------    -----------    -----------    ---------    --------
                                                                       (dollars in thousands, except per share amounts)
                                                                                                        
Operating Results:
Revenues:
     Rooms .................................................   $ 138,600    $   929,585    $   894,983    $ 395,633    $  9,880
     Food, beverage and other ..............................      17,435        397,205        387,091      152,276       1,871
     Corporate housing .....................................     103,638         64,872             --           --          --
     Management and other fees .............................      46,201         19,206         10,040       14,528      12,088
                                                               ---------    -----------    -----------    ---------    --------
          Total revenues ...................................     305,874      1,410,868      1,292,114      562,437      23,839
                                                               ---------    -----------    -----------    ---------    --------
Operating expenses:
Departmental expenses:
     Rooms .................................................      31,449        219,197        213,239       95,627       2,533
     Food, beverage and other ..............................      12,119        272,923        260,537      107,860       1,170
     Corporate housing expense .............................      76,019         42,827             --           --          --
Undistributed operating expenses:
     Administrative and general ............................      75,683        233,553        208,576       84,881      10,473
     Participating lease expense ...........................      59,375        431,014        404,086      186,601       4,135
     Property operating costs ..............................      33,250        188,235        182,412       76,300       1,917
     Depreciation and amortization .........................      12,958          9,470          6,014        3,372         636
     Merger and lease conversion costs .....................       4,239          2,989             --           --          --
     Charges to investments in and advances to
      affiliates, account and notes receivable and other ...      16,098             --             --           --          --
     Loss on asset impairment ..............................          --         21,657             --           --          --
     Restructuring expenses ................................       3,479             --             --           --          --
                                                               ---------    -----------    -----------    ---------    --------
          Total operating expenses .........................     324,669      1,421,865      1,274,864      554,641      20,864
                                                               ---------    -----------    -----------    ---------    --------
Net operating income (loss) ................................     (18,795)       (10,997)        17,250        7,796       2,975
Interest expense, net ......................................      11,303          6,401          4,692        2,017          56
Equity in (earnings) loss of affiliates ....................        (732)          (751)            31        1,337         (46)
Minority interests .........................................      (1,130)        (1,094)         1,916          155         103
Income tax expense (benefit) /(A)/ .........................      (9,287)        (6,173)         3,926          337          --
                                                               ---------    -----------    -----------    ---------    --------
          Net income (loss) ................................   $ (18,949)   $    (9,380)   $     6,685    $   3,950    $  2,862
                                                               =========    ===========    ===========    =========    ========
Basic earnings (loss) per share /(B)/ ......................   $   (0.51)   $     (0.27)   $      0.24    $    0.02          --
Diluted earnings (loss) per share /(B)/ ....................   $   (0.51)   $     (0.27)   $      0.24    $    0.02          --
Number of shares of common stock issued and
   outstanding /(C)/ .......................................      37,189         35,976         29,625       25,437          --
Other Financial Data:
EBITDA /(D)/ ...............................................   $  (5,105)   $      (776)   $    23,233    $   9,831    $  3,657
Net cash provided by (used in) operating activities ........     (10,156)         5,028         27,528       10,125      11,167
Net cash used in investing activities ......................     (11,339)       (32,486)       (32,837)    (102,109)     (6,501)
Net cash provided by (used in) financing
   activities ..............................................      18,497         33,308         (4,100)      76,113       4,208
Balance Sheet Data:
   Total assets ............................................   $ 242,937    $   338,214    $   258,144    $ 247,529    $ 84,419
   Long-term debt ..........................................     118,500        100,187         57,762       67,812         981


/(A) We did not include a provision for federal and state income taxes prior to
     August 3, 1998 because our predecessor entities were partnerships, and all
     income tax liabilities were passed through to the individual partners./

/(B) Our calculations of basic and diluted earnings per share for the year ended
     December 31, 1998 are based on earnings for the period from the date of our
     spin-off from CapStar Hotel Company, August 3, 1998 through December 31,
     1998./

/(C) As of December 31 for the periods presented./

/(D) EBITDA represents earnings before interest expense, income taxes,
     depreciation and amortization. We believe that EBITDA is a useful measure
     of operating performance because it is industry practice to evaluate hotel

                                       27



     properties based on operating income before interest, depreciation and
     amortization and minority interests of common and preferred operating
     partnership unit holders, which is generally equivalent to EBITDA, and
     EBITDA is unaffected by the debt and equity structure of the entity. EBITDA
     does not represent cash flow from operations as defined by generally
     accepted accounting principles, is not necessarily indicative of cash
     available to fund all cash flow needs, should not be considered as an
     alternative to net income under generally accepted accounting principles
     for purposes of evaluating our results of operations, and may not be
     comparable to other similarly titled measures used by other companies./

                                       28



ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

Background

     We manage, lease, and operate a portfolio of hospitality properties and
provide related services in the hotel, corporate housing, resort, conference
center, and golf markets. Our portfolio is diversified by franchise and brand
affiliations. We were created in connection with the August 3, 1998 merger of
American General Hospitality Corporation and CapStar Hotel Company. At the time
of the merger, CapStar distributed all of the shares of our common stock to its
shareholders and we became a separate, publicly traded company. The merger
created MeriStar Hospitality Corporation, a real estate investment trust. We are
the manager and operator of all of the hotels owned by MeriStar Hospitality.

     On May 31, 2000, we completed the acquisition of BridgeStreet
Accommodations, Inc. BridgeStreet provides corporate housing services in the
United States, Canada, the United Kingdom and France. Our consolidated financial
statements include the operating results of BridgeStreet since May 31, 2000. We
operate our corporate housing division under the name BridgeStreet Corporate
Housing Worldwide or BridgeStreet.

     Until January 1, 2001, we leased from MeriStar Hospitality their hotels
that we operated. As of January 1, 2001, we assigned these participating leases
to wholly-owned taxable subsidiaries of MeriStar Hospitality. In connection with
the assignment, MeriStar Hospitality's taxable subsidiaries executed new
management agreements with us to manage these hotels. Under these management
agreements, MeriStar Hospitality's taxable subsidiaries pay us a management fee
for each property. The management agreements were structured to substantially
mirror the economics of the former leases. We and MeriStar Hospitality did not
exchange any cash consideration except for the transfer of hotel operating
assets and liabilities to the taxable subsidiaries. Under the new management
agreements, the base management fee is 2.5% of total hotel revenue plus
incentives payments, based on meeting performance thresholds that could total up
to 1.5% of total hotel revenue. The agreements have an initial term of 10 years
with three renewal periods of five years each at our option, subject to some
exceptions. Because these leases have been assigned to MeriStar Hospitality's
taxable subsidiaries, those taxable subsidiaries now bear the operating risk
associated with these hotels.

     On January 1, 2001, we invested $100,000 in Flagstone Hospitality
Management LLC, a joint venture established to manage 54 hotels owned by RFS
Hotel Investors, Inc. We owned 51% of, and controlled, the joint venture during
2001. We have included the results of Flagstone in our consolidated financial
statements since January 1, 2001. Effective January 1, 2002, Flagstone became a
single member LLC, of which we own 100%.

     On August 17, 2001, our corporate housing division acquired Paris-based
Apalachee Bay Properties. Apalachee Bay is an apartment finder service, third-
party manager and a property sales brokerage business, representing 300 units.
Apalachee Bay has been renamed BridgeStreet Paris. Our consolidated financial
statements include the operating results of BridgeStreet Paris since August 17,
2001.

     The following table summarizes our historical portfolio of managed and
leased hotel properties as of December 31:

                        Leased              Managed                 Total
                -------------------   -------------------    -------------------
                Properties    Rooms   Properties    Rooms    Properties    Rooms
                ----------   ------   ----------   ------    ----------   ------
2001 .........          48    6,581          229   51,880          277    58,461
2000 .........         157   35,141           59   12,172          216    47,313
1999 .........         161   35,655           54    9,693          215    45,348

     As discussed above, effective January 1, 2001, we converted 106 leases with
MeriStar Hospitality to long-term management contracts. In addition, during
2001, we terminated three leases with another hotel owner and converted those
leases to long-term management contracts. Our remaining 48 leases are with
Winston Hotels, Inc. We have had, and continue to have, discussions with Winston
to convert these leases to long-term management contracts. We

                                       29



believe management contracts provide a better alignment of interests between a
hotel's owner and operator.

Business Summary

     The terrorist attacks of September 11, 2001 have had a negative impact on
our hotel operations in the third and fourth quarters, causing lower than
expected performance in an already slowing economy. The events of September 11th
have caused a significant decrease in our hotels' occupancy and average daily
rate due to disruptions in business and leisure travel patterns and concerns
about travel safety. Major metropolitan area and airport hotels have been
adversely affected due to concerns about air travel safety and a significant
overall decrease in the amount of air travel. Although the conversion of our
leases with MeriStar Hospitality to management contracts on January 1, 2001 has
significantly reduced the earnings volatility from hotel operations, we still
experience the effects of market downturns because our management fees are tied
directly to hotel revenues, and we continue to lease 48 hotel properties not
owned by MeriStar Hospitality.

In response to the decline in operating activity following the terrorist
attacks, we have worked with our hotel owners to aggressively review and reduce
the cost structure of the hotels we operate. We have implemented numerous
cost-cutting strategies, including the following items:

     .    reducing overall staffing and reducing hours for remaining hourly
          staff,

     .    instituting hiring and wage freezes for all properties,

     .    revising operating procedures to gain greater efficiencies and/or
          reduce costs,

     .    closing under-utilized or duplicative facilities and outlets,

     .    creating revised minimum staffing guides for each department in our
          hotels, and

     .    reducing capital expenditures to focus primarily on life-safety
          requirements, and deferring or terminating discretionary capital
          outlays.

     The September 11, 2001 terrorist attacks were unprecedented in scope and in
their immediate dramatic impact on travel patterns. We have not previously
experienced such events, and it is currently not possible to accurately predict
if and when travel patterns will be restored to pre-September 11 levels. While
we have had improvements in our operating levels from the period immediately
following the attacks, we believe the uncertainty associated with subsequent
incidents and the possibility of future attacks will continue to hamper business
and leisure travel patterns for the next several quarters.

     Our senior secured credit facility requires us to meet or exceed certain
financial performance ratios at the end of each quarter. Travel disruptions and
safety concerns following the terrorist attacks on September 11, 2001 and the
slowdown of the national economy resulted in a significant negative impact to
the lodging industry and our operations. This decline in operations would have
caused us to be out of compliance with certain financial covenants specified in
our senior credit facility. However, on October 24, 2001, we finalized a waiver
on all affected financial covenants with our senior bank group. This waiver to
the senior credit facility waived these covenants through February 28, 2002.

     On January 28, 2002, we amended our senior credit facility to provide more
flexibility under certain financial covenants and allow us to extend the
maturity from February 2002 until February 2003. The interest rate on the
revolver increases 100 basis points to 30-day London Interbank Offered Rate plus
450 basis points. We currently have no additional borrowing capacity under this
credit facility. The amendment also sets restrictions on investments and capital
expenditures. The availability under our senior secured credit facility must
also be reduced by $2.5 million on each of the following dates: February 28,
2002, June 30, 2002, September 30, 2002 and December 31, 2002. In addition, on
January 31, 2003, the availability under our senior credit facility will be
further reduced in the amount of our earnings before interest, taxes,
depreciation and amortization greater than $20 million, for 2002.

     On January 25, 2002, we amended our credit facility with MeriStar
Hospitality to provide financial covenant relief similar to that in our senior
credit facility. The maturity date remains 91 days after the maturity of the
senior credit facility. The interest rate also remains the same, at the 30-day
London Interbank Offered Rate plus 650 basis points.

                                       30



     In January 2002, in connection with the execution of the amendment to the
revolving credit facility with MeriStar Hospitality, we executed a Term Note
payable to MeriStar Hospitality in the amount of $13.1 million to refinance our
outstanding account payable due to MeriStar Hospitality. The Term Note bears
interest at the 30-day London Interbank Offered Rate plus 650 basis points and
matures on the same date as our revolving credit facility with MeriStar
Hospitality.

     In December 2001, we received notification from the NYSE that we were not
in compliance with the continued listing standards of the NYSE because our
average closing share price was less than $1.00 over a consecutive 30-day
trading period. The NYSE's continued listing standards require that we bring our
30-day average closing price and our share price above $1.00 by June 20, 2002,
subject to certain conditions. We are currently evaluating our alternatives with
regard to complying with this standard.

Critical Accounting Policies

     Accounting estimates are an integral part of the preparation of our
consolidated financial statements and our financial reporting process and are
based on our current judgments. Certain accounting estimates are particularly
sensitive because of their significance to our consolidated financial statements
and because of the possibility that future events affecting them may differ
markedly from our current judgments.

     The most significant accounting policies affecting the Company's
consolidated financial statements relate to:

          .    the evaluation of impairment of certain long-lived assets;

          .    estimation of valuation allowances, specifically those related to
               income taxes and allowance for doubtful accounts;

          .    estimates of restructuring and other accruals; and

          .    the evaluation of the fair value of our derivative instruments.

Impairment of long-lived assets

     Whenever events or changes in circumstances indicate that the carrying
value of a long-lived asset (including all intangibles) may be impaired, we
perform an analysis to determine the recoverability of the asset's carrying
value. We make estimates of the undiscounted cash flows from the expected future
operations of the asset. If the analysis indicates that the carrying value is
not recoverable from future cash flows, the asset is written down to estimated
fair value and an impairment loss is recognized. Any impairment losses are
recorded as operating expenses. In 2000, we recognized $21.7 million of
impairment losses. We did not recognize any impairment losses in 2001 or 1999.

     We review long-lived assets for impairment when one or more of the
following events has occurred:

     a.   Current or immediate short-term (future twelve months) projected cash
          flows are significantly less than the most recent historical cash
          flows.

     b.   The unplanned departure of an executive officer or other key personnel
          that could adversely affect our ability to maintain our competitive
          position and manage future growth.

     c.   A significant adverse change in legal factors or an adverse action or
          assessment by a regulator that could affect the value of the goodwill
          or other long-lived assets.

     d.   Events that could cause significant adverse changes and uncertainty in
          business and leisure travel patterns.

     We make estimates of the undiscounted cash flows from the expected future
operations of the asset. In

                                       31



projecting the expected future operations of the asset, we base our estimates on
future budgeted earnings before interest expense, income taxes, depreciation and
amortization, or EBITDA, amounts and use growth assumptions to project these
amounts out over the expected life of the underlying asset. Our growth
assumptions are based on assumed future improvements in the national economy and
improvements in the demand for lodging; if actual conditions differ from those
in our assumptions, the actual results of each asset's actual future operations
could be significantly different from the estimated results we used in our
analysis. Our operating results also are subject to risks set forth under "Risk
Factors - Operating Risks."

Valuation Allowances

     We use our judgment in determining our provision for income taxes, our
deferred tax assets and liabilities, and any valuation allowance recorded
against our deferred tax assets. We have recorded a $7.9 million valuation
allowance as of December 31, 2001 to reduce our deferred tax assets to the
amount that we believe is more likely than not to be realized. This is an
allowance against some, but not all, of our recorded deferred tax assets. We
have considered estimated future taxable income and prudent and feasible ongoing
tax planning strategies in assessing the need for a valuation allowance. Our
estimates of taxable income require us to make assumptions about various factors
that affect our operating results, such as economic conditions, consumer demand,
competition and the other factors that are listed in Item 1, "Risk
Factors--Operating Risks" and "Forward-Looking Information." Our actual results
may differ from these estimates. Based on actual results or a revision in future
estimates, we might determine that we would not be able to realize additional
portions of our net deferred tax assets in the future. If that occurred, we
would record a charge to the income tax provision in that period. We also might
determine that we would be able to realize all or part of the deferred tax
assets covered by the existing valuation allowance. If that occurred, we would
record a credit to the income tax provision in that period.

     We record an allowance for doubtful accounts based on our judgment in
determining the ability and willingness of our customers to make required
payments. Our judgments in determining customers' ability and willingness are
based on past experience with customers and our assessment of the current and
future operating environments for our customers. If a customer's financial
condition deteriorates or a management contract is terminated in the future,
this could decrease a customer's ability or obligation to make payments. If that
occurred, we might have to make additional allowances, which could reduce our
earnings.

Restructuring and Other Accruals

     During 2001, the slowing national economy and travel disruptions from the
September 11, 2001 terrorist attacks negatively affected our operations. In
response to these events, we implemented restructuring plans to reduce our
overhead costs. These plans included termination of some personnel positions as
well as the abandonment of some leases. We accrued the total estimated cost of
the restructuring at the time the plans were finalized and communicated to our
employees. These estimates require our judgment as to the outcome of net lease
costs. If actual results differ from our estimates, we will be required to
adjust our financial statements when we identify the differences.

Derivative Instruments and Hedging Activities

     We enter into derivative instruments for cash flow hedging purposes to
limit the impact of interest rate changes on earnings and cash flows. We have
designated our interest rate swap agreements as hedges against changes in future
cash flows associated with the interest payments of our variable rate debt
obligations. Accordingly, we reflect the interest rate swap agreements at fair
value in our consolidated balance sheet as of December 31, 2001, and we record
in stockholders' equity the related unrealized gains and losses on these
contracts. We assess interest rate cash flow risk by continually identifying and
monitoring changes in interest rate exposures that may adversely impact expected
future cash flows and by evaluating hedging opportunities.

Results of Operations

                                       32



Historical Year Ended December 31, 2001 Compared to Pro Forma Year Ended
December 31, 2000

     Effective January 1, 2001, we assigned our leases with MeriStar Hospitality
to taxable subsidiaries of MeriStar Hospitality. In connection with the
assignment, we executed management agreements with the taxable subsidiaries of
MeriStar Hospitality for the properties we previously leased from MeriStar
Hospitality. Through December 31, 2000, our results of operations included both
operating revenue and expenses for these hotels. Beginning January 1, 2001, our
results of operations reflect only management fee revenue from these hotels.
Therefore, our operating results for the year ended December 31, 2001 are not
directly comparable to those for the same period in 2000.

     Because of the lease conversions, we believe presenting the pro-forma
effect - showing our results as if the lease conversions had occurred earlier -
provides a more meaningful view of our operating results. For comparative
purposes, the following table shows the results for the twelve months ended
December 31, 2000 on a pro forma basis assuming the leases with MeriStar
Hospitality were converted to management contracts on January 1, 2000. These pro
forma results are compared to the actual results for the twelve months ended
December 31, 2001 (dollars in thousands, except per share amounts):



                                                                              2001         2000
                                                                              ----         ----
                                                                                     
Total Revenue .............................................................   $ 305,874    $ 279,193
Operating expenses by department:
    Rooms .................................................................      31,449       34,405
    Food and beverage .....................................................       8,069        9,829
    Other operating department expenses ...................................       4,050        4,869
    Corporate housing .....................................................      76,019       42,827
Undistributed operating expenses:
    Administrative and general ............................................      75,683       66,001
    Participating lease expense ...........................................      59,375       66,800
    Property operating costs ..............................................      33,250       31,343
    Depreciation and amortization .........................................      12,958        9,470
    Merger and lease conversion costs .....................................       4,239        2,989
    Charges to investments in and advances to affiliates, accounts and
    notes receivable and other ............................................      16,098           --
    Loss on asset impairment ..............................................          --       21,657
    Restructuring charges .................................................       3,479           --

Earnings (loss) before interest, taxes, depreciation and
amortization ..............................................................      (5,105)        (776)
Net income (loss) .........................................................     (18,949)      (9,380)
Diluted income (loss) per common share ....................................   $   (0.51)   $   (0.27)


     As explained above, through December 31, 2000 we recorded the operating
revenues and expenses of the hotels we leased from MeriStar Hospitality in our
results of operations. The pro forma 2000 results reverse the effect of
recording the operating revenues and expenses of these hotels, and instead
reflect the management fee revenue we would have earned from operating those
hotels. Since we consider the pro forma 2000 operating amounts as a more
meaningful comparison to our actual 2001 results, we will discuss changes
relative to those pro forma 2000 amounts rather than our actual reported 2000
results.

Revenues
- --------

     We earn revenue from leased hotels, management contracts and related
services and corporate housing operations. We recognize revenue from our leased
hotels from their rooms, food and beverage and other operating departments as
earned at the close of each business day. Our management and other fees consist
of base and incentive management fees received from third-party owners of hotel
properties and fees for other related services we provide. We recognize base
fees and fees for other services as revenue when earned in accordance with the
individual management contracts. In accordance with Staff Accounting Bulletin
No. 101, "Revenue Recognition in

                                       33



Financial Statements," we accrue incentive fees in the period when we are
certain they are earned. For contracts with annual incentive fee measurements,
we typically will record any incentive fees in the last month of the annual
contract period.

     The following table shows the operating statistics for our full-service
managed and limited-service leased hotels on a same-store basis for the twelve
months ended December 31:

                                              2001        2000        Change
                                             -------     -------      ------

Revenue per available room ...........       $ 66.85     $ 73.52      (9.1%)
Average daily rate ...................       $102.01     $103.32      (1.2%)
Occupancy ............................          65.5%       71.2%     (8.0%)

     Overall, disruptions in travel patterns and travel safety concerns due to
the terrorist attacks on September 11, 2001 and the slowing United States
economy had a major negative effect on our managed and leased hotels during the
last half of 2001. In addition, the travel concerns and a slowing economy have
had a negative effect on our corporate housing operations. We have seen a sharp
reduction in both business and leisure travel. This is reflected in the 9.1%
reduction in revenue per available room and the 8.0% reduction in occupancy for
2001 compared to 2000. This slowdown was more pronounced during the third and
fourth quarters of 2001.

     On a pro forma basis, our total revenue increased $26.7 million to $305.9
million in 2001 compared to $279.2 million in 2000. Major components of this
increase were:

     .    Our corporate housing revenue increased by $38.8 million due to the
          inclusion of twelve months of BridgeStreet operations in 2001,
          compared to only seven months of BridgeStreet operations in 2000.

     .    Our revenue from our leased hotels (from rooms, food and beverage and
          other operating departments) decreased $13.0 million, resulting from
          the disruptions in travel patterns due to travel safety concerns and
          the slowdown of the economy as discussed above.

     .    Our management fee revenue remained stable. Our revenue from existing
          management contracts was lower than the prior year by approximately
          $5.7 million due to the disruptions in travel patterns due to travel
          safety concerns and the slowdown of the economy as discussed above.
          This decline was offset, however, by a $5.8 million increase in our
          management fees from Flagstone. We included Flagstone's results in our
          consolidated results beginning January 1, 2001, the time of our
          $100,000 investment, representing 51% ownership and control.

Operating Expenses by Department
- --------------------------------

     On a pro forma basis, our operating expenses by department, including room,
food and beverage, other operating department expenses and corporate housing
increased by $27.7 million from $91.9 million in 2000 to $119.6 million in 2001.
Major components of this increase were:

     .    Our corporate housing expenses increased $33.2 million due to the
          inclusion of twelve months of BridgeStreet operations in 2001,
          compared to only seven months of BridgeStreet operations in 2000.

     .    Our operating expenses from our leased hotels (from room, food and
          beverage and other department expenses) decreased $5.5 million. This
          was a direct result of the decrease in revenue from our leased hotels
          described above.

Undistributed Operating Expenses
- --------------------------------

     Our undistributed operating expenses include the following items:
     .    administrative and general;

                                       34



     .    property operating costs;

     .    participating lease expense;

     .    depreciation and amortization;

     .    loss on asset impairment, merger and lease conversion costs;

     .    charges to investments in and advances to affiliates, accounts and
          notes receivable, and other; and

     .    restructuring expenses.

     On a pro forma basis our total undistributed operating expenses increased
by $6.8 million from $198.3 million in 2000 to $205.1 million in 2001. Major
components of this are described in the following paragraphs.

     Administrative and general expenses are associated with the management of
hotels and corporate housing facilities and consist primarily of expenses such
as operations management, sales and marketing, finance, information technology
support, human resources and other support services, as well as general
corporate expenses. On a pro forma basis, administrative and general expenses
increased by $9.7 million from $66.0 million in 2000 to $75.7 million in 2001.
This increase was primarily due to a $5.5 million increase in expenses
attributable to Flagstone in 2001 and a $1.6 million increase attributable to
BridgeStreet in 2001.

     Participating lease expense represents base rent and participating rent
that is based on a percentage of rooms and food and beverage revenues from the
leased hotels. On a pro forma basis, participating lease expense decreased by
$7.4 million from $66.8 million in 2000 to $59.4 million in 2001. This decrease
relates directly to the decrease in revenues from leased hotels.

     Property operating costs include energy costs, repairs and maintenance,
franchise fees, insurance, taxes, management fees and other expenses. On a pro
forma basis, property operating costs increased by $1.9 million from $31.3
million in 2000 to $33.2 million in 2001. This increase was primarily due to a
$2.2 million increase in expenses related to BridgeStreet offset by a decrease
in leased hotels' costs as a result of decreased revenues from those hotels.

     On a pro forma basis, depreciation and amortization increased by $3.5
million from $9.5 million in 2000 to $13.0 million in 2001. Approximately $2.1
million of this increase was attributable to including a full year of
BridgeStreet's operations in our 2001 results, as compared with only seven
months of BridgeStreet operations in 2000. The remaining $1.4 million increase
is attributable to additions to fixed assets and intangible assets during 2000
and 2001.

     Merger and lease conversion costs of $3.0 million for 2000, included the
expenses related to our proposed merger with American Skiing Company ($2.7
million) and costs related to the conversion of the MeriStar Hospitality leases
to management contracts ($0.3 million). During 2001, we recorded $4.2 million of
additional costs related to the proposed merger with American Skiing Company. On
March 22, 2001, we and the other parties to the merger agreement mutually agreed
to terminate the agreement. There were no termination fees payable to any of the
parties.

     The operating expense line item titled charges to investments in and
advances to affiliates, accounts and notes receivable, and other includes
reserves against accounts and notes receivables and charges to write-off the
remaining book values of impaired and abandoned assets. The following is a
summary of the amounts comprising the $16.1 million charge we took in 2001:

     .    During the first quarter of 2001, several of the hotels that we manage
          experienced severe financial difficulties, which affected the
          collectibility of our accounts and notes receivable from these hotels.
          One of the hotel owners filed for bankruptcy. The lender subsequently
          foreclosed on this hotel in early July 2001. We terminated our
          management agreement with another hotel owner in the second quarter of
          2001. As a result, we fully reserved for the amounts due from these
          entities in the amount of $5.1 million and recorded a charge to
          write-off other related assets in the amount of $1.8 million.

     .    We also wrote off our investments in an internet services company and
          certain real estate ventures. The internet services company
          significantly curtailed its operations during the first quarter of
          2001. We

                                       35



          are involved in a dispute with our partners in the real estate
          ventures and believe that the recorded values of our investments in
          these real estate ventures have been impaired as a result of this
          dispute. We recorded a charge in the amount of $5.2 million to reduce
          the book values of these assets.

     .    In connection with the conversion of our lease contracts to management
          contracts, we implemented changes to our business structure, which
          resulted in the abandonment of certain fixed assets totaling $2.9
          million.

     .    One of our former partners in our operating partnership claimed
          that we owed them special distributions under the partnership
          agreement. We have estimated the amount of distributions due to the
          former partner to be $325,000, which we accrued at March 31, 2001 and
          paid later in 2001.

     .    We exited three management contracts in October 2001. This resulted in
          uncollectible management fees and reimbursable expenses. We fully
          reserved the amount due from these entities in the amount of $798,000
          in September 2001. We have not collected any amounts on these
          receivables.

     Loss on asset impairment includes a write-down of intangible assets during
2000 in accordance with SFAS No. 121. In the fourth quarter of 2000, we
conducted a review of each property's performance and anticipated future
performance and our expected future income from those properties. As a result of
this review, we reduced our expectation for the future performance of some of
our leased limited-service hotels. This process triggered an impairment review
of our long-lived intangible assets associated with these hotels, including
goodwill. The review included analysis of our expected future undiscounted cash
flows in comparison to net book value of the long-lived intangible assets. This
review indicated that certain long-lived assets related to our leased
limited-service hotels, including goodwill, were impaired. We estimated the fair
value of the long-lived intangible assets by using the discounted expected
future cash flows generated by the underlying assets. We reduced the net book
value of those long-lived intangible assets to their estimated realizable fair
value and recorded an impairment loss of $21.7 million to adjust the goodwill
related to our leased limited-service hotels.

     We incurred restructuring charges of $3.5 million, consisting of severance-
related costs and lease termination costs in connection with three separate
restructurings during 2001, as described below:

     .    During the second quarter of 2001, we restructured our Corporate
          Office as a result of the change to management contracts with MeriStar
          Hospitality and the termination of the merger agreement with American
          Skiing Company. This restructuring is expected to reduce our
          annualized corporate overhead expenditures by approximately 10%, or
          $3.5 million. We recorded $0.9 million in 2001 in employee severance
          costs and lease termination costs related to this restructuring.

     .    During the third and fourth quarters of 2001, we restructured our
          Corporate Housing segment as a result of the slowdown in the national
          economy and shifted our focus from certain markets. We closed our
          offices in four markets: Jackson, Mississippi; Lexington, Kentucky;
          Denver, Colorado; and Phoenix, Arizona. We also realigned and
          eliminated certain administrative functions to achieve additional cost
          savings. We recorded a $1.2 million restructuring charge in 2001 for
          employee severance costs, lease termination costs and other expenses
          related to this restructuring. This restructuring is expected to
          reduce our annualized net expense by approximately $1.5 million.

     .    During the fourth quarter of 2001, we recorded a $1.4 million
          restructuring charge. This charge is due to additional personnel
          reductions in our Corporate Office. This restructuring was the result
          of declines in our business due to the slowdown of the national
          economy and the disruptions in business and leisure travel due to
          travel safety concerns since the terrorist attacks on September 11,
          2001. This restructuring is expected to reduce our annualized
          corporate overhead by approximately $1.9 million.

Earnings (loss) before Interest, Taxes, Depreciation and Amortization
- ---------------------------------------------------------------------

     On a pro forma basis, earnings (loss) before interest, taxes, depreciation
and amortization, or EBITDA, decreased $4.3

                                       36



million from $(0.8) million in 2000 to $(5.1) million in 2001. Major components
of this decrease were:

     .    Our Corporate Housing segment's EBITDA decreased by $3.5 million due
          to the excess inventory carried in 2001 and the inclusion of
          underperforming markets for a full twelve months in 2001 compared to
          seven months in 2000. During the latter half of 2001, we restructured
          our Corporate Housing segment as described above.

     .    Our Hotel Management segment's EBITDA increased by $1.2 million from
          $16.7 million in 2000 to $17.9 million in 2001 due to the increase in
          number of properties we managed and leased from 2000 to 2001 and an
          increase in EBITDA from our existing limited-service hotels.

     .    Our remaining EBITDA decreased by $2.0 million primarily due to the
          following charges recorded in 2000 and 2001:

          .    Merger and lease conversion costs of $4.2 million in 2001
               compared to $3.0 million in 2000; o Charges to investments in and
               advances to affiliates, accounts and notes receivable, and other
               of $16.1 million in 2001;

          .    Goodwill impairment of $21.7 million in 2000;

          .    Restructuring charges of $3.5 million in 2001; and

          .    Losses of $1.1 million in our vacation ownership division in
               2000. This division was eliminated during 2001 as part of our
               restructuring plan in the second quarter.

Net loss
- --------

     Our net loss increased by $9.5 million from $(9.4) million in 2000 to
$(18.9) million in 2001. This increase is due to the decrease of $4.3 million in
EBITDA and the increase of $3.5 million in depreciation and amortization expense
as discussed above. The major components of the $1.8 million remaining increase
were:

     .    Our interest expense increased by $4.9 million in 2001 due to the
          increase in our total outstanding long-term debt balance.

     .    Our income tax benefit increased by $3.1 million due to the increase
          of $12.7 million in our loss before income taxes offset by a decrease
          of 6.8% in our effective tax rate.

Historical Year Ended December 31, 2000 Compared to Historical Year Ended
December 31, 1999

Revenues
- --------

     The following table provides our operating statistics for our leased hotels
on a same-store basis:

                                                 2000       1999    Change
                                                -------    ------   ------

Revenue per available room ............         $ 73.11    $69.69    4.9%
Average daily rate ....................         $102.38    $97.00    5.5%
Occupancy .............................            71.4%     71.8%  (0.6%)

     Our total revenue increased $118.8 million, or 9.2%, to $1,410.9 million in
2000, compared to $1,292.1 million in 1999.

     .    Our corporate housing revenue increased by $64.9 million in 2000 due
          to the acquisition of BridgeStreet on May 31, 2000.

     .    Our revenue from our leased hotels (from rooms, food and beverage and
          other operating departments) increased $44.7 million in 2000 resulting
          from a 4.9% improvement in revenue per available room. The improvement
          in revenue per available room was primarily the result of a 5.5%
          increase in the average

                                       37



          daily rate.

     .    Our management fee revenue increased by $9.2 million in 2000,
          resulting from an increase in the number of management contracts in
          2000 and better performance of existing hotels.

Operating Expenses by Department
- --------------------------------

     Our total operating expenses by department increased $61.1 million to
$534.9 million in 2000 compared to $473.8 million in 1999. The increase is
primarily the result of:

     .    The acquisition of BridgeStreet in May 2000, which accounted for $42.8
          million in operating expenses in 2000.

     .    Our operating expenses from our leased hotels (from room, food and
          beverage and other department expenses) increased $18.4 million in
          2000 due to the increase in leased hotel revenue described above.

Undistributed Operating Expenses
- --------------------------------

     Our total undistributed operating expenses increased $85.8 million to
$886.9 million in 2000 compared to $801.1 million in 1999.

     .    Our administrative and general costs, increased by $25.0 million in
          2000 due to higher insurance and labor costs.

     .    Our participating lease expense and property operating costs increased
          by $32.8 million in total in 2000, which is attributable to the
          increase in lease revenue described above.

     .    Depreciation and amortization increased by $3.4 million in 2000, $1.5
          million of which was due to the acquisition of BridgeStreet, while the
          remaining $1.9 million increase was due to additions to fixed assets
          and intangible assets, including the goodwill recorded as a result of
          the BridgeStreet acquisition.

     .    We recorded a $21.7 million loss on asset impairment in accordance
          with SFAS No. 121 during 2000 because of write-downs in the carrying
          value of goodwill associated with some of our leased limited-service
          hotels.

     .    Merger and lease conversion costs of $2.9 million for 2000 include the
          expenses related to our proposed merger with American Skiing Company
          ($2.7 million) and the conversions of the MeriStar Hospitality leases
          to management contracts ($0.3 million). On March 22, 2001, we and the
          other parties to the merger agreement mutually agreed to terminate the
          agreement. There were no termination fees payable to any of the
          parties.

Earnings before Interest, Taxes, Depreciation and Amortization
- --------------------------------------------------------------

     EBITDA decreased $24.1 million from $23.3 million in 1999 to $(0.8) million
in 2000. Major components of this decrease were:

     .    Our Corporate Housing segment generated $4.7 million of EBITDA in 2000
          due to the inclusion of seven months of BridgeStreet operations in
          2000.

     .    Our Hotel Management segment's EBITDA decreased by $6.8 million from
          $23.5 million in 2000 to $16.7 million in 2001 primarily due to an
          increase in our labor and insurance expenses in 2000.

     .    Our remaining EBITDA decreased by $22.0 million primarily due to a
          $21.7 million loss on asset impairment recorded in 2000.

                                       38



Net income
- ----------

     Our net income decreased by $16.1 million from $6.7 million in 1999 to
$(9.4) million in 2000. This decrease is due to the decrease of $24.1 million in
EBITDA, the increase of $3.4 million in depreciation and amortization expense as
discussed above and the increase in our interest expense of $1.7 million due to
the increase in our total outstanding long-term debt balance in 2000. This was
offset by:

     .    A decrease in minority interest of $3.0 million primarily due to lower
          operating income compared to 1999 and the conversion of operating
          partnership units to common stock; and

     .    An income tax benefit of $6.1 million in 2000 compared to income tax
          expense of $3.9 million in 1999.

Liquidity and Capital Resources

     Our cash and cash equivalent assets decreased by $3.0 million from $7.6
million at December 31, 2000 to $4.6 million at December 31, 2001.

Sources of Cash

     We fund our continuing operations through cash generated from hotel
management and corporate housing operations. We finance capital expenditures,
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. Factors that may influence our liquidity include:

     .    Factors that affect our results of operations, including general
          economic conditions, demand for business and leisure travel, public
          concerns about travel safety and other operating risks described under
          the caption, "Risk Factors--Operating Risks";

     .    Factors that affect our access to bank financing and the capital
          markets, including interest rate fluctuations, operational risks and
          other risks described under the caption "Risk Factors--Financing
          Risks"; and

     .    The other factors described under the caption, "Forward-Looking
          Information."

     Our financing activities provided $18.5 million of cash during 2001
primarily from net borrowings of $18.3 million on our credit facilities. As of
February 15, 2002, we had no availability under our senior secured credit
facility and approximately $6.0 million available under our credit facility with
MeriStar Hospitality. This credit facility with MeriStar Hospitality, however,
can be amended to provide for potential additional borrowings subject to our
compliance with certain leverage ratios as well as approval from MeriStar
Hospitality's Board of Directors. Based on our leverage ratio at February 15,
2002, the credit facility with MeriStar Hospitality could provide up to
approximately $34 million of additional borrowings, contingent upon the approval
of MeriStar Hospitality's Board of Directors.

Uses of Cash

     We used $10.2 million of cash in operations during 2001 primarily as a
result of the reduction in the payable to MeriStar Hospitality, offset by other
operating activity.

     We used $11.3 million of cash in investing activities during 2001 primarily
due to:

     .    $3.8 million of hotel operating cash transferred to the taxable
          subsidiaries of MeriStar Hospitality as part of the assignment of the
          leases on January 1, 2001; and

     .    $6.2 million of cash used to acquire BridgeStreet Paris and management
          contracts on six hotels.

     In January 2002, in connection with the execution of the amendment to the
revolving credit facility with MeriStar Hospitality, we issued a Term Note
payable to MeriStar Hospitality in the amount of $13.1 million, which refinances
our account payable to MeriStar Hospitality. The Term Note bears interest at the
30-day London

                                       39



Interbank Offered Rate plus 650 basis points and matures on the same date as the
revolving credit facility with MeriStar Hospitality, which is 91 days after the
maturity of our senior secured credit agreement.

Revolving Credit Facilities

     In 1998, we entered into a three-year, $75 million revolving credit
facility with MeriStar Hospitality. This facility was subsequently amended on
February 29, 2000 to reduce the maximum borrowing limit to $50 million and to
change the maturity date to 91 days after the maturity date of our senior
secured credit facility. This loan contains covenants regarding financial
ratios, reporting requirements and other customary restrictions. The interest
rate on this facility is variable, based on the 30-day London Interbank Offered
Rate plus 650 basis points. As of December 31, 2001, we had $36 million
outstanding under this facility at an effective interest rate of 10.8%.

     On January 25, 2002, we amended our credit facility with MeriStar
Hospitality to provide financial covenant relief similar to that in our senior
credit facility. The maturity date remained at 91 days after the maturity of our
senior credit facility. The interest rate also remained the same, at the 30-day
London Interbank Offered Rate plus 650 basis points.

     On February 29, 2000, we entered into a $100 million senior secured credit
facility among a syndicate of banks. Our senior secured credit facility has only
a revolving credit facility and no term facilities. The interest rate on the
facility is the 30-day London Interbank Offered Rate plus 350 basis points. The
senior secured credit facility originally was to expire in February 2002, with a
one-year extension at our option.

     The senior credit facility contains certain covenants, including
maintenance of financial ratios at the end of each quarter, reporting
requirements and other customary restrictions. Travel disruptions and safety
concerns following the terrorist attacks on September 11, 2001 had a significant
negative impact on the lodging industry and our operations. This decline in
operations would have caused us to be out of compliance with these financial
covenants. However, effective September 30, 2001, we finalized a waiver of all
affected financial covenants with our senior bank group through February 28,
2002. On January 28, 2002, we amended our senior secured credit facility to
provide more flexibility with certain financial covenants and allow us to extend
the maturity from February 2002 until February 2003. The interest rate on the
facility was increased to the 30-day London Interbank Offered Rate plus 450
basis points. We currently have no additional borrowing capacity under this
credit facility. The amendment also sets restrictions on investments and capital
expenditures as well as requiring that availability under the facility be
reduced by $2.5 million on February 28, 2002, June 30, 2002, September 30, 2002
and December 31, 2002. In addition, on January 31, 2003, the amount available
under the senior credit facility will be further reduced in the amount of our
EBITDA greater than $20 million, for 2002.

     The interest rate on borrowings under our senior credit facility as of
December 31, 2001 and 2000, respectively, was 7.9% and 10.2%. We incurred
interest expense of $6.9 million and $7.3 million on this facility during 2001
and 2000 respectively.

Contractual Obligations and Maturities of Indebtedness

     We lease some hotels under non-cancelable participating leases with
remaining initial terms ranging from 9 to 12 years, expiring through 2013. The
participating leases have minimum base rent requirements. We also lease
apartments for our Corporate Housing operations and corporate office space.
Those leases have terms up to 13 years.

     Minimum payments due (principal only) under our debt and lease obligations
as of December 31, 2001 (as adjusted by the January 2002 amendments to our
senior credit facility) were as follows (in thousands):



                                          Revolving Credit
                                           Facility with
                        Senior Credit   MeriStar Hospitality    Non-Cancelable
                           Facility         Corporation        Operating Leases    Total
                        -------------   --------------------   ----------------   --------
                                                                      
2002                          $10,000              $     --            $ 60,484   $ 70,484


                                       40



                                                                      
2003                           72,500                36,000              42,278    150,778
2004                               --                    --              40,148     40,148
2005                               --                    --              39,657     39,657
2006                               --                    --              38,381     38,381
2007 and thereafter                --                    --             225,566    225,566
                              ------------------------------------------------------------
                              $82,500              $ 36,000            $446,514   $565,014
                              ============================================================



Summary

     During 2001, a significant portion of our cash inflows came from borrowings
under our credit facilities. Our lower-than-expected operating results in 2001
required us to negotiate amendments to our credit facilities. These amendments
imposed restrictions that may limit our ability to execute our business strategy
and increase the risk of default under out debt obligations. While we believe
our current business plan and operating expectations will provide sufficient
liquidity to fund our operations, a significant decline in our operations could
leave us unable to use our senior credit facility to supply needed liquidity.

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 the peak travel season.
For resort properties, demand is generally higher in the winter and early
spring. Since the majority of our hotels are non-resort properties, our
operations generally have reflected non-resort seasonality patterns. We expect
to 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, although the disruptions caused by the September 11, 2001
attacks and their aftermath may cause disruptions to this pattern.

     Corporate housing activity traditionally 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.

                                       41



     ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We are exposed to market risk from changes in interest rates on our credit
facilities. Our interest rate risk management objective is to limit the impact
of interest rate changes on earnings and cash flows and to lower our overall
borrowing costs.

     In April 2001, we entered into a $50 million, one-year interest rate swap
agreement with a financial institution to hedge against the effect future
interest rate fluctuations may have on our floating rate debt. The swap
agreement effectively fixes the 30-day London Interbank Offered Rate at 4.4%.
During the year ended December 31, 2001, we paid $275,000 under this agreement.
The fair value of the interest rate swap agreement was $415,000 at December 31,
2001.

     In April 2000, we entered into a $40 million, 23-month periodic rate collar
agreement with a financial institution in order to hedge against the effect
future interest rate fluctuations may have on our floating rate debt. The rate
collar agreement establishes the 30-day London Interbank Offered Rate at a floor
rate of 6.05% and a ceiling rate of 8.5%. During the year ended December 31,
2001, we paid $808,000 under this agreement. The fair value of the rate collar
agreement was $271,000 at December 31, 2001.

     Our senior secured debt of $82.5 million at December 31, 2001 matures in
February 2003. Interest on the debt is variable, based on the 30-day London
Interbank Offered Rate plus 450 basis points. The weighted average effective
interest rate was 7.9% at December 31, 2001. We have determined that the fair
value of the debt approximates its carrying value.

     Our $36.0 million of long-term debt under the MeriStar Hospitality
revolving credit facility at December 31, 2001 matures 91 days after the
maturity date of our senior secured credit facility. Interest on the debt is
variable, based on the 30-day London Interbank Offered Rate plus 650 basis
points. The weighted average effective interest rate was 10.8% at December 31,
2001. We have determined that the fair value of the debt approximates its
carrying value.

     A 1.0% change in the 30-day London Interbank Offered Rate would have
changed our interest expense by approximately $0.3 million during the year ended
December 31, 2001.

     Our international operations are subject to foreign exchange rate
fluctuations. We derived approximately 14% of our revenue for the year ended
December 31, 2001 from services performed in Canada, the United Kingdom and
France. Our foreign currency transaction gains and losses were not material to
our results of operations for the year ended December 31, 2001. To date, since
most of our foreign operations have been largely self contained we have not been
exposed to material foreign exchange risk. Therefore, we have not entered into
any significant foreign currency exchange contracts or other derivative
financial instruments to hedge the effects of adverse fluctuations in foreign
currency exchange rates. In the event that we will have large transactions
requiring currency conversion we will reevaluate whether we should engage in
hedging activity.

                                       42



     ITEM 8. FINANCIAL STATEMENTS

     The following Consolidated Financial Statements are filed as part of this
Annual Report on Form 10-K:

MeriStar Hotels & Resorts, Inc.

                                                                                                      
Independent Auditors' Report.........................................................................    44

Consolidated Balance Sheets as of December 31, 2001 and 2000.........................................    45

Consolidated Statements of Operations for the Years Ended December 31, 2001, 2000 and 1999...........    46

Consolidated Statements of Stockholders' Equity  for the Years Ended December 31, 2001, 2000 and
1999.................................................................................................    47

Consolidated Statements of Cash Flows for the Years Ended December 31, 2001, 2000 and 1999...........    48

Notes to the Consolidated Financial Statements.......................................................    49



     All Financial Statement Schedules are omitted because they are not
applicable or the required information is shown in the Consolidated Financial
Statements or the Notes thereto.

                                       43



                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
MeriStar Hotels & Resorts, Inc.:

     We have audited the accompanying consolidated balance sheets of MeriStar
Hotels & Resorts, Inc. and subsidiaries as of December 31, 2001 and 2000 and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 2001.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of MeriStar
Hotels & Resorts, Inc. and subsidiaries as of December 31, 2001 and 2000, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States of America.

                                           KPMG LLP

Washington, D.C.
January 29, 2002

                                       44



MERISTAR HOTELS & RESORTS, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 2001 and 2000
(in thousands, except per share amounts)



                                                                                   2001         2000
                                                                                 ---------    ---------
                                                                                        
ASSETS
Current Assets:
     Cash and cash equivalents ...............................................   $   4,584    $   7,645
     Accounts receivable, net of allowance for doubtful accounts of $3,422 and
        $4,097 ...............................................................      10,155       72,655
     Prepaid expenses ........................................................       5,668        9,719
     Deposits and other ......................................................       3,527       12,107
                                                                                 ---------    ---------
Total current assets .........................................................      23,934      102,126
                                                                                 ---------    ---------
Fixed assets:
     Furniture, fixtures, and equipment ......................................      32,595       33,996
     Accumulated depreciation ................................................     (14,712)      (9,247)
                                                                                 ---------    ---------
Total fixed assets, net ......................................................      17,883       24,749
                                                                                 ---------    ---------
Investments in and advances to affiliates ....................................      30,003       40,109
Intangible assets, net of accumulated amortization of $18,498 and $11,899 ....     163,352      166,898
Deferred income taxes ........................................................       7,765           --
                                                                                 ---------    ---------
                                                                                 $ 242,937    $ 333,882
                                                                                 =========    =========
LIABILITIES, MINORITY INTERESTS, AND STOCKHOLDERS' EQUITY
Current Liabilities:
     Accounts payable, accrued expenses and other liabilities ................   $  50,149    $ 119,597
     Due to MeriStar Hospitality Corporation .................................       8,877       22,222
     Income taxes payable ....................................................       1,300        1,923
     Long-term debt, current portion .........................................      10,000          147
                                                                                 ---------    ---------
Total current liabilities ....................................................      70,326      143,889
Deferred income taxes ........................................................          --        5,508
Derivative financial instruments .............................................         687
Long-term debt ...............................................................     108,500      100,040
                                                                                 ---------    ---------
Total liabilities ............................................................     179,513      249,437
                                                                                 ---------    ---------
Minority interests ...........................................................       6,293       11,140
Stockholders' equity:
     Common stock, par value $0.01 per share:
          Authorized--100,000 shares
          Issued and outstanding--37,189 and 35,976 shares ...................         372          360
          Additional paid-in capital .........................................      78,841       74,989
          Deficit ............................................................     (21,093)      (2,144)
     Accumulated other comprehensive income:
          Translation adjustment .............................................        (313)         207
          Unrealized loss on derivative financial instruments ................        (687)          --
          Unrealized gain (loss) on investments ..............................          11         (107)
                                                                                 ---------    ---------
               Total stockholders' equity ....................................      57,131       73,305
                                                                                 ---------    ---------
                                                                                 $ 242,937    $ 333,882
                                                                                 =========    =========


          See accompanying notes to consolidated financial statements.

                                       45



MERISTAR HOTELS & RESORTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 2001, 2000 and 1999
(in thousands, except per share amounts)



                                                              2001           2000          1999
                                                            ---------    -----------    ----------
                                                                               
Revenue:
     Rooms ..............................................   $ 138,600    $   929,585    $  894,983
     Food and beverage ..................................      10,862        304,415       295,551
     Corporate housing ..................................     103,638         64,872            --
     Other operating departments ........................       6,573         92,790        91,540
     Management and other fees ..........................      46,201         19,206        10,040
                                                            ---------    -----------    ----------
Total revenue ...........................................     305,874      1,410,868     1,292,114
                                                            ---------    -----------    ----------
Operating expenses by department:
     Rooms ..............................................      31,449        219,197       213,239
     Food and beverage ..................................       8,069        219,791       217,349
     Corporate housing ..................................      76,019         42,827            --
     Other operating departments ........................       4,050         53,132        43,188
Undistributed operating expenses:
     Administrative and general .........................      75,683        233,553       208,576
     Participating lease expense ........................      59,375        431,014       404,086
     Property operating costs ...........................      33,250        188,235       182,412
     Depreciation and amortization ......................      12,958          9,470         6,014
     Merger and lease conversion costs ..................       4,239          2,989            --
     Charges to investments in and advances to
        affiliates, accounts and notes receivable, and
           other ........................................      16,098             --            --
     Loss on asset impairment ...........................          --         21,657            --
     Restructuring charges ..............................       3,479             --            --
                                                            ---------    -----------    ----------
       Total operating expenses .........................     324,669      1,421,865     1,274,864
                                                            ---------    -----------    ----------

Net operating income (loss) .............................     (18,795)       (10,997)       17,250
Interest expense, net ...................................      11,303          6,401         4,692
Equity in (earnings) losses of affiliates ...............        (732)          (751)           31
                                                            ---------    -----------    ----------
Income (loss) before minority interests and income taxes      (29,366)       (16,647)       12,527
Minority interests ......................................      (1,130)        (1,094)        1,916
Income tax expense (benefit) ............................      (9,287)        (6,173)        3,926
                                                            ---------    -----------    ----------
Net income (loss) .......................................   $(18,949)    $    (9,380)   $    6,685
                                                            ========     ===========    ==========
Earnings (loss) per share:
     Basic ..............................................   $   (0.51)   $     (0.27)   $     0.24
     Diluted ............................................   $   (0.51)   $     (0.27)   $     0.24


          See accompanying notes to consolidated financial statements.

                                       46



MERISTAR HOTELS & RESORTS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 2001, 2000 and 1999
(in thousands)



                                                                                                Accumulated
                                                                                                -----------
                                                                    Additional    Retained         Other
                                                                    ----------    --------         -----
                                                                      Paid-in     Earnings     Comprehensive
                                                                      -------     --------     -------------
                                                  Common Stock        Capital     (Deficit)     Income (loss)     Total
                                                ----------------    ----------    ---------    --------------    --------
                                                Shares    Amount
                                                ------    ------
                                                                                               
Balance, January 1, 1999 ...................    25,437      $254       $43,894     $    551             $  35    $ 44,734
Net income for the year ....................        --        --            --        6,685                --       6,685
Foreign currency translation adjustment ....        --        --            --           --                (2)         (2)
                                                                                                                 --------
Comprehensive income .......................                                                                        6,683
                                                                                                                 --------
Issuances of common stock ..................     1,820        18         4,793           --                --       4,811
Redemption of OP units .....................     1,908        19         7,816           --                --       7,835
Issuances of common stock under Stock
Purchase Plan ..............................       381         4           935           --                --         939
Proceeds from exercise of stock options, net        79         1           199           --                --         200
                                                ------      ----       -------     --------             -----    --------
Balance, December 31, 1999 .................    29,625       296        57,637        7,236                33      65,202
Net loss for the year ......................        --        --            --       (9,380)               --      (9,380)
Foreign currency translation adjustment ....        --        --            --           --               174         174
Unrealized loss on investments .............        --        --            --           --              (107)       (107)
                                                                                                                 --------
Comprehensive income .......................                                                                       (9,313)
                                                                                                                 --------
Issuance of common stock ...................     5,890        59        16,180           --                --      16,239
Redemption of OP Units .....................       156         2           389           --                --         391
Issuance of common stock under Stock
Purchase Plan ..............................       255         2           634           --                --         636
Proceeds from exercise of stock options, net        50         1           149           --                --         150
                                                ------      ----       -------     --------             -----    --------
Balance, December 31, 2000 .................    35,976       360        74,989       (2,144)              100      73,305
Net loss for the year ......................        --        --            --      (18,949)               --     (18,949)
Foreign currency translation adjustment ....        --        --            --           --              (520)       (520)
Transition Adjustment ......................        --        --            --           --              (205)       (205)
Unrealized loss on derivative financial
instruments ................................        --        --            --           --              (482)       (482)
Unrealized gain on investments .............        --        --            --           --               118         118
                                                                                                                 --------
Comprehensive income (loss) ................                                                                      (20,038)
                                                                                                                 --------
Redemption of OP Units .....................     1,092        11         3,612           --                --       3,623
Issuance of common stock under Stock
Purchase Plan ..............................       121         1           240           --                --         241
                                                ------      ----       -------     --------             -----    --------
Balance, December 31, 2001 .................    37,189      $372       $78,841     $(21,093)            $(989)   $ 57,131
                                                ======      ====       =======     ========             =====    ========


        See accompanying notes to the consolidated financial statements.

                                       47



MERISTAR HOTELS & RESORTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2001, 2000, and 1999
(in thousands)



                                                                                 2001        2000       1999
                                                                              ---------   ---------   ---------
                                                                                             
Operating activities:
   Net income (loss) ......................................................   $ (18,949)  $  (9,380)  $   6,685
   Adjustments to reconcile net income (loss) to net cash provided by (used
    in) operating activities:
     Depreciation and amortization ........................................      12,958       9,470       6,014
     Equity in (earnings) losses of affiliates ............................        (732)       (751)         31
     Minority interests ...................................................      (1,130)     (1,094)      1,916
     Deferred income taxes ................................................     (10,997)     (8,246)      3,880
     Loss on asset impairment .............................................          --      21,657          --
     Charges to investments in and advances to affiliates, accounts and
      notes receivable, and other .........................................      16,098          --          --
     Changes in operating assets and liabilities, excluding effects of
      acquisitions:
       Accounts receivable, net ...........................................       8,339     (20,331)     14,011
       Prepaid expenses ...................................................       2,570        (445)        604
       Deposits and other .................................................       2,100      (1,462)        497
       Accounts payable, accrued expenses and other liabilities ...........      (6,425)      3,191      (8,033)
       Due to MeriStar Hospitality Corporation ............................     (13,345)     10,746       1,912
       Income taxes payable ...............................................        (643)      1,673          11
                                                                              ---------   ---------   ---------
         Net cash provided by (used in) operating activities ..............     (10,156)      5,028      27,528
                                                                              ---------   ---------   ---------
Investing activities:
   Purchases of fixed assets ..............................................      (1,639)     (9,211)     (7,507)
   Purchases of intangible assets .........................................      (6,161)     (1,929)     (3,388)
   Investments in and advances to affiliates ..............................          66      (9,340)    (22,338)
   Hotel operating cash transferred with lease conversions ................      (3,778)         --          --
   Cash received (paid) to shareholders on acquisitions ...................         173     (12,216)         --
   Change in restricted cash ..............................................          --         210         396
                                                                              ---------   ---------   ---------
         Net cash used in investing activities ............................     (11,339)    (32,486)    (32,837)
                                                                              ---------   ---------   ---------
Financing activities:
   Proceeds from issuance of long-term debt ...............................     102,000     154,500     177,000
   Principal payments on long-term debt ...................................     (83,655)   (112,201)   (187,050)
   Proceeds from issuances of common stock, net ...........................         241       5,786       5,950
   Purchase of operating partnership units ................................          --      (1,149)         --
   BridgeStreet Accommodations debt repaid ................................          --     (12,021)         --
   Deferred financing costs ...............................................          --      (1,607)         --
   Contributions from minority investors ..................................          25          --          --
   Distributions to minority investors ....................................        (114)         --          --
                                                                              ---------   ---------   ---------
         Net cash provided by (used in) financing activities ..............      18,497      33,308      (4,100)
                                                                              ---------   ---------   ---------
Effect of exchange rate changes on cash ...................................         (63)         69         (20)
                                                                              ---------   ---------   ---------
Net increase (decrease) in cash and cash equivalents ......................      (3,061)      5,919      (9,429)
Cash and cash equivalents, beginning of year ..............................       7,645       1,726      11,155
                                                                              ---------   ---------   ---------
Cash and cash equivalents, end of year ....................................   $   4,584   $   7,645   $   1,726
                                                                              =========   =========   =========


          See accompanying notes to consolidated financial statements.

                                       48



MERISTAR HOTELS & RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001, 2000 and 1999
(dollars in thousands, except per share amounts)

1.   Organization

     We manage, lease, and operate a portfolio of hospitality properties and
provide related services in the hotel and corporate housing markets. Our
portfolio is diversified by franchise and brand affiliations. We were created in
connection with the August 3, 1998 merger of American General Hospitality
Corporation and CapStar Hotel Company. At the time of the merger, CapStar
distributed all of the shares of our common stock to its shareholders and we
became a separate, publicly traded company. The merger created MeriStar
Hospitality Corporation, a real estate investment trust. We are the manager and
operator of all of the hotels owned by MeriStar Hospitality.

     MeriStar H&R Operating Company, L.P., our subsidiary operating partnership,
indirectly holds substantially all of our assets. We are the sole general
partner of that partnership. We, one of our directors and approximately 85
independent third-parties are limited partners of that partnership. The
partnership agreement gives the general partner full control over the business
and affairs of the partnership.

     We have an intercompany agreement with MeriStar Hospitality. That agreement
provides each of us the right to participate in certain transactions entered
into by the other company. The intercompany agreement provides MeriStar
Hospitality with a right of first refusal with respect to some of our hotel real
estate opportunities and it also provides us with a right of first refusal with
respect to some of MeriStar Hospitality's hotel management opportunities
(excluding hotels that MeriStar Hospitality elects to have managed by a hotel
brand). We also provide each other with certain services. These services are
described in Note 9.

     On May 31, 2000, we completed the acquisition of BridgeStreet
Accommodations, Inc. BridgeStreet provides corporate housing services in the
United States, Canada, the United Kingdom and France. Our consolidated financial
statements include the operating results of BridgeStreet since May 31, 2000. We
operate our corporate housing division under the name BridgeStreet Corporate
Housing Worldwide.

     Until January 1, 2001, we leased and operated MeriStar Hospitality's
hotels. As of January 1, 2001, we assigned these participating leases to
wholly-owned taxable subsidiaries of MeriStar Hospitality. In connection with
the assignment, MeriStar Hospitality's taxable subsidiaries executed new
management agreements with us to manage these hotels. Under these management
agreements, MeriStar Hospitality's taxable subsidiaries pay us a management fee
for each property. The management agreements were structured to substantially
mirror the economics of the former leases. We and MeriStar Hospitality did not
exchange any cash consideration as a result of these transactions except for the
transfer of hotel operating assets and liabilities to the taxable subsidiaries.
Under the new management agreements, the base management fee is 2.5% of total
hotel revenue plus incentives payments, based on meeting performance thresholds
that could total up to 1.5% of total hotel revenue. The agreements have an
initial term of 10 years with three renewal periods of five years each at our
option, subject to some exceptions. Because these leases have been assigned to
MeriStar Hospitality's taxable subsidiaries, those taxable subsidiaries now bear
the operating risk associated with these hotels.

     On January 1, 2001, we invested $100 in Flagstone Hospitality Management
LLC, a joint venture established to manage 54 hotels owned by RFS Hotel
Investors, Inc. We own 51% of, and control, the joint venture. We have included
the results of Flagstone in our consolidated financial statements since January
1, 2001. Effective January 1, 2002 Flagstone became a single member LLC, of
which we own 100%.

     On August 17, 2001, our Corporate Housing division acquired Paris-based
Apalachee Bay Properties. Apalachee Bay is an apartment finder service, third
party manager and a property sales brokerage business and represents 300 units.
Apalachee Bay has been renamed BridgeStreet Paris. Our consolidated financial
statements include the operating results of BridgeStreet Paris since August 17,
2001.

     As of December 31, 2001, we leased or managed 277 hotels with 58,461 rooms
in 43 states, the
                                       49



District of Columbia and Canada. In addition, we had 3,054 apartments under
lease in the United States, Canada, the United Kingdom and France at December
31, 2001.

2.   Summary of Significant Accounting Policies

     Principles of Consolidation--Our consolidated financial statements include
our accounts and the accounts of all of our majority-owned subsidiaries. As part
of our consolidation process, we eliminate all significant intercompany balances
and transactions.

     We use the equity method to account for investments in unconsolidated joint
ventures and affiliated companies in which we hold a voting interest of 50% or
less and we exercise significant influence. We use the cost method to account
for investments in entities in which we do not have the ability to exercise
significant influence.

     Cash Equivalents--We consider all highly liquid investments with an
original maturity of three months or less to be cash equivalents.

     Allowance for Doubtful Accounts--We provide an allowance for doubtful
accounts receivable when we determine it is more likely than not a specific
account will not be collected. Although it is reasonably possible that our
estimate for doubtful accounts could change in the near future, we are not aware
of any events that would result in a change to our estimate that would be
material to our financial position or results of operations. At December 31,
2001 and 2000 we had an allowance for doubtful accounts of $3,422 and $4,097,
respectively.

     Fixed Assets-- We record our fixed assets at cost. We depreciate these
assets using the straight-line method over lives ranging from three to seven
years.

     Intangible Assets--Our intangible assets consist of goodwill, hotel
contracts purchased, franchise costs, and costs incurred to obtain management
contracts. Goodwill is the excess of the cost to acquire a business over the
fair value of the net identifiable assets of that business. We amortize
intangible assets on a straight-line basis over the estimated useful lives of
the underlying assets. These lives range from five to 40 years.

     Impairment of Long-Lived Assets--Whenever events or changes in
circumstances indicate that the carrying values of long -lived assets (including
all intangibles) may be impaired, we perform an analysis to determine the
recoverability of the asset's carrying value. We make estimates of the
undiscounted cash flows from the expected future operations of the asset. If the
analysis indicates that the carrying value is not recoverable from future cash
flows, the asset is written down to estimated fair value and an impairment loss
is recognized. Any impairment losses are recorded as operating expenses.

     We review long-lived assets for impairment when one or more of the
following events have occurred:

     a.   Current or immediate short-term (future twelve months) projected cash
          flows are significantly less than the most recent historical cash
          flows.

     b.   A significant loss of management contracts without the realistic
          expectation of a replacement.

     c.   The unplanned departure of an executive officer or other key personnel
          which could adversely affect our ability to maintain our competitive
          position and manage future growth.

     d.   A significant adverse change in legal factors or an adverse action or
          assessment by a regulator, which could affect the value of the
          goodwill or other long-lived assets.

     e.   Events which could cause significant adverse changes and uncertainty
          in business and leisure travel patterns.

                                       50



     We make estimates of the undiscounted cash flows from the expected future
operations of the asset. In projecting the expected future operations of the
asset, we base our estimates on future budgeted earnings before interest
expense, income taxes, depreciation and amortization, or EBITDA, amounts and use
growth assumptions to project these amounts out over the expected life of the
underlying asset.

     As described in Note 4, we recorded impairment losses in 2000 related to a
portion of our long-lived asset balances. We did not record any impairment
losses in 1999 or 2001.

     Income Taxes--We account for income taxes using Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." Deferred income
taxes reflect the tax consequences on future years of differences between the
tax bases of assets and liabilities and their financial reporting amounts.

     Foreign Currency Translation--We maintain the results of operations for our
foreign locations in the local currency and translate these results using the
average exchange rates during the period. We translate the assets and
liabilities to U.S. dollars using the exchange rate in effect at the balance
sheet date. We reflect the resulting translation adjustments in stockholders'
equity as a cumulative foreign currency translation adjustment.

     Stock-Based Compensation--We have adopted the disclosure-only provisions of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." Accordingly, we apply Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," in accounting for our stock-based
plans. We have made all our grants at fair value, and therefore, we have not
recognized any compensation cost for these grants.

     Revenue Recognition--We earn revenue from leased hotels, management
contracts and related sources, and corporate housing operations. We recognize
revenue from our leased hotels from their rooms, food and beverage and other
operating departments as earned at the close of each business day. Our
management and other fees consist of base and incentive management fees received
from third-party owners of hotel properties and fees for other related services
we provide. We recognize base fees and fees for other services as revenue when
earned in accordance with the individual management contracts. In accordance
with Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements," we accrue incentive fees in the period when we are certain they are
earned. For contracts with annual incentive fee measurements, we typically will
record any incentive fees in the last month of the annual contract period.

     Participating Lease Agreements--Our participating leases have
non-cancelable remaining terms ranging from 9 to 12 years, subject to earlier
termination upon the occurrence of certain contingencies as defined in the
leases. The rent payable under each participating lease is the greater of base
rent or percentage rent, as defined. Percentage rent applicable to room and food
and beverage 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. During interim reporting periods, we recognize contingent rental
expense prior to the achievement of the specified target that triggers the
contingent rental expense if we consider it probable we will achieve the
specified target by the end of the fiscal year.

     Comprehensive Income--Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income," requires companies to display comprehensive
income and its components in a financial statement to be included in a company's
full set of annual financial statements or in the notes to financial statements.
Comprehensive income represents a measure of all changes in equity of a company
that result from recognized transactions and other economic events for the
period other than transactions with owners in their capacity as owners. Our
comprehensive income includes net income and other comprehensive income from
foreign currency items, derivative instruments, transition adjustments, and
unrealized gains (losses) from our investments.

     Derivative Instruments and Hedging Activities--SFAS No. 133, "Accounting
for Derivative Instruments and

                                       51



Hedging Activities," requires an entity to recognize all derivatives as either
assets or liabilities in the balance sheet and measure those instruments at fair
value. SFAS No. 137 and No. 138 amended certain provisions of FAS No. 133. We
adopted these accounting pronouncements effective January 1, 2001.

     Our interest rate risk management objective is to limit the impact of
interest rate changes on earnings and cash flows. We assess interest rate cash
flow risk by continually identifying and monitoring changes in interest rate
exposures that may adversely impact expected future cash flows, and by
evaluating hedging opportunities. We do not enter into derivative instruments
for any purpose other than cash flow hedging purposes.

     Our interest rate swap agreements have been designated as hedges against
changes in future cash flows associated with the interest payments of our
variable rate debt obligations. Accordingly, the interest rate swap agreements
are reflected at fair value in our consolidated balance sheet as of December 31,
2001 and the related unrealized gains or losses on these contracts are recorded
in stockholders' equity as a component of accumulated and other comprehensive
income.

     We recognized a transition adjustment of $205 as the fair value of our
derivative instruments at January 1, 2001. We recorded a liability and
corresponding charge to other comprehensive income for this amount. As of
December 31, 2001, the fair value of our derivative instruments represents a
liability of $687. The estimated net amount recorded in accumulated other
comprehensive income is expected to be reclassified to the statement of
operations during 2002.

     Earnings per Share--We present basic and diluted earnings per share, or
EPS, on the face of the income statement. Basic EPS excludes dilution and is
computed by dividing income available to common stockholders by the weighted
average number of common shares outstanding for the period. Diluted EPS reflects
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock that then
shared in the earnings of the entity. Dilutive securities are excluded from the
computation in periods in which they have an anti-dilutive effect.

     New Accounting Pronouncements--In June 2001, the Financial Accounting
Standards Board issued SFAS No. 141, "Business Combinations," SFAS No. 142,
"Goodwill and Other Intangible Assets," and SFAS No. 143, "Accounting for Asset
Retirement Obligations." SFAS No. 142 eliminates the amortization of goodwill
and replaces it with a requirement to conduct an impairment analysis of the
carrying value of the goodwill at least annually, and more often as
circumstances warrant. We will adopt this standard on January 1, 2002. In August
2001, the FASB issued SFAS No. 144 "Accounting for the Impairment or Disposal of
Long-Lived Assets," which supersedes SFAS No. 121. We are currently in the
process of evaluating the effect these new standards will have on our financial
statements.

     Use of Estimates--To prepare financial statements in conformity with
accounting principles generally accepted in the United States of America, we
must make estimates and assumptions. These estimates and assumptions affect the
reported amounts on our balance sheet and income statement, and the disclosure
of contingent assets and liabilities at the date of the financial statements.
Our actual results could differ from those estimates. Based on managements
estimates, we believe our cash flows from operations will be sufficient to fund
our cash needs over the next year. However, a prolonged economic slowdown or a
deterioration in our current operating results could adversely impact our
ability to fund our cash needs through operations.

     Reclassifications--We have reclassified certain 2000 and 1999 amounts to be
consistent with the 2001 classifications.

3.   Investments in and Advances to Affiliates

     Our investment in and advances to joint ventures and affiliated companies
consists of the following:

                                                              December 31,
                                                         -----------------------
                                                          2001            2000
                                                         -------         -------
CapStar Hallmark Company, L.L.C ..................       $11,699         $11,495
MIP Lessee, L.P. .................................        11,224          10,654
CapStar San Diego HGI Associates .................         4,076           4,076
CapStar Wyandotte II, LLC ........................            --           2,683
Sapphire Beach Resort & Marina ...................            --           2,116
Ballston Parking Associates ......................            --           1,629

                                       52



BoyStar Ventures, L.P. ...........................            --           1,546
Other ............................................         3,004           5,910
                                                         -------         -------
                                                         $30,003         $40,109
                                                         =======         =======

     As described in Note 15, we wrote off our investments in Capstar Wyandotte
II, BoyStar Ventures, LP, Sapphire Beach Resort & Marina and several notes
receivable in the first quarter of 2001. An interest in Ballston Parking
Associates was assigned to MeriStar Hospitality Corporation as a result of the
transfer of hotel leases to MeriStar Hospitality's taxable subsidiaries on
January 1, 2001.

     The combined summarized financial information of our unconsolidated joint
ventures and affiliated companies is as follows:

                                                              December 31,
                                                         -----------------------
                                                          2001            2000
                                                         --------       --------
Balance sheet data:
Current assets .................................         $ 12,672       $ 31,712
Non-current assets .............................          413,652        429,094
Current liabilities ............................           16,271         16,610
Non-current liabilities ........................          228,458        240,757
Equity .........................................          181,595        203,439
Operating data:
Revenue ........................................         $147,719       $143,877
Net income .....................................            9,734          9,352

4.   Intangible Assets

     Intangible assets consist of the following:

                                                             December 31,
                                                        -----------------------
                                                          2001           2000
                                                        --------      --------
Goodwill .........................................      $132,512      $130,468
Hotel contracts ..................................        43,000        41,747
Other ............................................         6,338         6,582
                                                        --------      --------
                                                         181,850       178,797
Less accumulated amortization ....................       (18,498)      (11,899)
                                                        --------      --------
                                                        $163,352      $166,898
                                                        ========      ========

     During 2000, we conducted a review of each property's performance and
anticipated future performance and our expected future income from those
properties in accordance with SFAS No. 121. We conducted this review in
connection with the possible restructuring of our lease arrangements. As a
result of this review, we reduced our expectation for the future performance of
some of our leased limited-service hotels. This process triggered an impairment
review of our long-lived intangible assets, including goodwill. The review
included an analysis of our expected future undiscounted cash flows in
comparison to the net book value of the long-lived intangible assets associated
with these hotels. This review indicated that certain long-lived intangible
assets, including goodwill, were impaired. We estimated the fair value of the
long-lived intangible assets by using the discounted expected future cash flows
generated by the underlying assets. We reduced the net book value of those
long-lived intangible assets to their estimated fair value and recorded an
impairment loss of $21,657 to adjust the goodwill related to our leased
limited-service hotels.

5.   Long-Term Debt

     Long-term debt consists of the following:

                                       53



                                                               December 31,
                                                         -----------------------
                                                           2001          2000
                                                         --------      --------
Senior secured credit facility .....................     $ 82,500      $100,000
Revolving credit facility with MeriStar Hospitality        36,000            --
Other ..............................................           --           187
                                                         --------      --------
                                                         $118,500      $100,187
                                                         --------      --------
Less current portion ...............................      (10,000)         (147)
                                                         --------      --------
                                                         $108,500      $100,040
                                                         ========      ========

     Senior Secured Credit Facility--On February 29, 2000, we entered into a
$100 million senior secured credit facility among a syndicate of banks. Our
senior secured credit facility has only a revolving credit facility and no term
facilities. The interest rate on the facility was the 30-day London Interbank
Offered Rate plus 350 basis points. The senior secured credit facility
originally was to expire in February 2002, with a one-year extension at our
option.

     The senior credit facility contains certain covenants, including
maintenance of financial ratios at the end of each quarter, reporting
requirements and other customary restrictions. Travel disruptions and safety
concerns following the terrorist attacks on September 11, 2001 had a significant
negative impact on the lodging industry and our operations. This decline in
operations would have caused us to be out of compliance with these financial
covenants. However, effective September 30, 2001, we finalized a waiver of all
affected financial covenants with our senior bank group through February 28,
2002. On January 28, 2002, we amended our senior secured credit facility to
provide more flexibility with certain financial covenants and allow us to extend
the maturity from February 2002 until February 2003. The interest rate on the
facility was increased to the 30-day London Interbank Offered Rate plus 450
basis points. The amendment also reduced our borrowing capacity to $82.5
million. The amendment also sets restrictions on investments and capital
expenditures as well as requiring that availability under the facility be
reduced by $2.5 million on February 28, 2002, June 30, 2002, September 30, 2002
and December 31, 2002. In addition, on January 31, 2003, the amount available
under the senior credit facility will be further reduced in the amount of our
EBITDA greater than $20 million, for 2002. Based on this amendment, we have
reclassified $10 million from Long-term debt to Long-term debt, current portion
on the consolidated balance sheet at December 31, 2001.

     The weighted average effective interest rate on borrowings under our senior
credit facility as of December 31, 2001 and 2000 was 7.9% and 10.2%,
respectively. We incurred interest expense of $6.9 million and $7.3 on this
facility during 2001 and 2000, respectively.

     Revolving Credit Facility with MerStar Hospitality--In 1998, we entered
into a three-year, $75,000 unsecured revolving credit facility with MeriStar
Hospitality. This facility was subsequently amended on February 29, 2000 to
reduce the maximum borrowing limit to $50,000 and to change the maturity date to
91 days after the maturity of our senior secured credit facility. The credit
facility contains certain covenants, including maintenance of financial ratios,
reporting requirements and other customary restrictions. Interest on the
facility is variable, based on the 30-day London Interbank Offered Rate plus 650
basis points. The weighted average effective interest rate as of December 31,
2001 was 10.8%. We incurred interest expense of $3,610, $955, and $4,907 on this
facility during 2001, 2000, and 1999, respectively.

     On January 25, 2002, we amended our credit facility with MeriStar
Hospitality Corporation to provide financial covenant relief similar to that in
our senior credit facility. The maturity date and interest rate remained the
same.

     In connection with the execution of the amendment to the revolving credit
facility with MeriStar Hospitality, we executed a Term Note payable to MeriStar
Hospitality in the amount of $13,069, which refinances our account payable due
to MeriStar Hospitality. The Term Note bears interest at the 30-day London
Interbank Offered Rate plus 650 basis points and matures on the same date as the
revolving credit facility with MeriStar Hospitality.

     We have determined that the fair values of our outstanding borrowings on
our senior credit facility and note payable to MeriStar Hospitality approximate
their carrying values at December 31, 2001.

6.   Income Taxes

     Our effective income tax expense (benefit) rate for the years ended
December 31, 2001, 2000 and 1999 differs from the federal statutory income tax
rate as follows:

                                       54



                                                   2001      2000     1999
                                                  -----     -----     ----
Statutory tax rate ...........................    (35.0)%   (35.0)%   35.0%
State and local taxes ........................     (4.0)     (3.9)     4.0
Difference in rates on foreign subsidiaries ..      0.5       0.3       --
Business meals and entertainment .............      0.2       0.3      0.7
Compensation expense .........................      2.8       1.9     (0.5)
   Tax credits ...............................    (28.1)       --       --
Valuation allowance ..........................     28.1        --     (5.8)
Amortization .................................      0.4       1.2       --
Other ........................................      2.2      (4.5)     3.6
                                                  -----     -----     ----
                                                  (32.9)%   (39.7)%   37.0%
                                                  =====     =====     ====

     The components of income tax expense (benefit) are as follows:

                                      2001       2000       1999
                                    --------    -------    ------
Current:
     Federal ....................   $     --    $   100    $   --
     State ......................        450        525        46
     Foreign ....................      1,260      1,448        --
                                    --------    -------    ------
                                       1,710      2,073        46
                                    --------    -------    ------
Deferred:
     Federal ....................     (8,827)    (6,798)    3,276
     State ......................     (2,170)    (1,448)      604
                                    --------    -------    ------
                                     (10,997)    (8,246)    3,880
                                    --------    -------    ------
                                    $ (9,287)   $(6,173)   $3,926
                                    ========    =======    ======

     The tax effects of the temporary differences and carryforwards that give
rise to our net deferred tax asset (liability) at December 31, 2001 and 2000 are
as follows:

                                                            2001          2000
                                                          --------      --------
Deferred tax assets:
     Allowance for doubtful accounts ................     $     --      $   387
     Minority interests temporary difference ........        1,279          347
     Net operating loss carryforward ................       16,937          572
     Accrued expenses ...............................        1,388        2,936
     Deferred income ................................           --           40
           Tax credits ..............................        7,925           --
     Other ..........................................           84           48
                                                          --------      -------
          Total gross deferred tax assets ...........       27,613        4,330
            Less:  valuation allowance ..............       (7,925)          --
                                                          --------      -------
              Net deferred tax assets ...............     $ 19,688      $ 4,330
                                                          ========      =======
Deferred tax liabilities:
     Allowance for doubtful accounts ................     $   (180)     $    --
     Depreciation and amortization expense ..........       (9,237)      (5,871)
     Prepaid expenses ...............................         (304)         (98)
     Intangible assets basis differences ............       (1,340)      (3,572)
           Equity in investee earnings ..............         (609)          --
     Other ..........................................         (253)        (297)
                                                          --------      -------
          Total gross deferred tax liabilities ......      (11,923)      (9,838)
                                                          --------      -------
          Net deferred tax asset (liability) ........     $  7,765      $(5,508)
                                                          ========      =======

     At December 31, 2001, we had potential federal income tax benefits of
$7,925 from certain tax credits that generated deferred tax assets during 2001.
For financial reporting purposes, we established a valuation allowance of $7,925
due to the substantial uncertainty associated with realizing this deferred tax
asset.

                                       55



     At December 31, 2001, we had net operating loss carryforwards of
approximately $41,076 that begin to expire in 2018.

7.   Stockholders' Equity and Minority Interests

     Common Stock--In conjunction with our spin-off from CapStar, CapStar
distributed all of the 24,948,754 outstanding shares of our common stock to its
stockholders, on a share-for-share basis.

     In 1998, we established a stock purchase plan that allowed eligible
employees to purchase our common stock at a discount to market value. We have
reserved 1,500,000 shares of common stock for issuance under this plan. As of
December 31, 2000, we had sold approximately 641,000 shares under this plan. We
suspended this employee stock purchase plan effective December 31, 2000. In
2001, we distributed shares held in the plan to each participant.

     In April 1999, we privately issued 1,818,182 shares of our common stock at
a price of $2.75 per share to our joint venture partner in MIP Lessee, L.P. In
January 2000, we privately issued an additional 1,818,182 shares of our common
stock at a price of $2.75 per share to our joint venture partner in MIP Lessee,
L.P.

     On May 31, 2000, we issued 4,072,099 shares of common stock to the
shareholders of BridgeStreet Accommodations, Inc. to acquire BridgeStreet.

     Operating Partnership Units-- MeriStar H&R Operating Company, L.P., our
subsidiary operating partnership, indirectly holds substantially all of our
assets. We are the sole general partner of that partnership. We, one of our
directors and approximately 85 independent third-parties are limited partners of
that partnership. The partnership agreement gives the general partner full
control over the business and affairs of the partnership. The agreement also
gives us, as general partner, the right, in connection with the contribution of
property to the partnership or otherwise, to issue additional partnership
interests in the partnership in one or more classes or series. These interests
may have such designations, preferences and participating or other special
rights and powers, including rights and powers senior to those of the existing
partners, as we may determine.

     The partnership agreement currently has three classes of limited
partnership interests: Class A units, Class B units and Preferred units. As of
December 31, 2001, the ownership of the limited partnership units was as
follows:

     .    We and our wholly-owned subsidiaries own a number of Class A units
          equal to the number of outstanding shares of our common stock; and

     .    Other limited partners own 543,539 Class A units, 1,275,607 Class B
          units and 392,157 Preferred units.

     We did not make any distributions during 2001, 2000 or 1999 to the holders
of the Class A units and Class B units. Holders of preferred units receive a
6.5% cumulative annual preferred return based on capital amount of $3.34 per
unit; compounded quarterly to the extent not paid currently. All net income and
capital proceeds received by the partnership, after payment of the annual
preferred return and, if applicable, the liquidation preference, will be shared
by the holders of the Class A units and Class B units in proportion to the
number of units owned by each holder.

     The holders of each Class A or Class B unit not held by us or one of our
subsidiaries is redeemable for cash equal to the value of one share of our
common stock or, at our option, one share of our common stock. Until April 1,
2004, the partnership may redeem the Preferred units for cash at a price of
$3.34 per unit or, (with the holder's consent) for our common stock having
equivalent aggregate value. After April 1, 2004, each holder of the Preferred
units may require the partnership to redeem these units for cash at a price of
$3.34 per unit or, at the holder's option, shares of our common stock having
equivalent aggregate value. If we or the holders of the Preferred units chose to
redeem the Preferred units for our common stock instead of cash, and if our
common stock was valued at that time at less than $3.34 per share, we would have
to issue more shares of our common stock than the number of Preferred units
being redeemed. For example, at December 31, 2001, our stock price was $0.69 per
share. If the Preferred

                                       56



units were redeemed for common stock at that date, we would have issued
1,898,267 shares of our common stock, which would have represented approximately
4.9% of our then outstanding common stock, with respect to 392,157 Preferred
units then outstanding.

     In conjunction with the spin-off from CapStar, we issued 1,083,759 Class A
and B units and 392,157 Preferred units to holders of CapStar operating
partnership units. Immediately following the spin-off, we acquired 100% of the
partnership interests in AGH Leasing, L.P. and acquired substantially all of the
assets and certain liabilities of American General Hospitality, Inc. We funded
the purchase price of $95,000 through a combination of cash and the issuance of
3,414,872 Class B units.

     In May 2000, we repurchased 409,523 Class A operating partnership units at
a price of $2.81 per unit.

8.   Earnings (Loss) Per Share

     The following tables present the basic and diluted earnings (loss) per
share computations for the years ended December 31, 2001, 2000 and 1999:



                                                                       2001        2000       1999
                                                                     --------    --------    -------
                                                                                    
Basic Earnings (Loss) Per Share Computation:
     Net income (loss) ...........................................   $(18,949)   $ (9,380)   $ 6,685
     Weighted average number of shares of common stock outstanding     36,986      34,148     27,868
                                                                     --------    --------    -------
     Basic earnings (loss) per share .............................   $  (0.51)   $  (0.27)   $  0.24
                                                                     ========    ========    =======
Diluted Earnings (Loss) Per Share Computation:
     Net income (loss) ...........................................   $(18,949)   $ (9,380)   $ 6,685
                                                                     --------    --------    -------
Weighted average number of shares of common stock outstanding ....     36,986      34,148     27,868
Common stock equivalents--stock options ..........................         --          --        146
Common stock equivalents--operating partnership units ............         --          --        392
                                                                     --------    --------    -------
Total weighted average number of diluted shares of common stock
   Outstanding ...................................................     36,986      34,148     28,406
                                                                     --------    --------    -------
Diluted earnings (loss) per share ................................   $  (0.51)   $  (0.27)   $  0.24
                                                                     ========    ========    =======


     We do not include operating partnership units in the computation of diluted
earnings (loss) per share when their effect is anti-dilutive.

9.   Related-Party Transactions

     Pursuant to an intercompany agreement, we and MeriStar Hospitality provide
each other with, among other things, reciprocal rights to participate in certain
transactions entered into by each party. In particular, we have a right of first
refusal to become the manager of any real property MeriStar Hospitality
acquires. Under our intercompany agreement with MeriStar Hospitality, we provide
each other with certain services. These services include administrative,
renovation supervision, corporate, accounting, finance, risk management, legal,
tax, information technology, human resources, acquisition identification and due
diligence, and operational services. We believe we compensate each other in an
amount that would be charged by an unaffiliated third party for comparable
services. We were paid a net amount of $151, $1,165 and $1,600 during 2001, 2000
and 1999, respectively, for services provided to MeriStar Hospitality.

10.  Stock-Based Compensation

     We have an equity incentive plan that authorizes us to issue and award
options for up to up 15 percent of the number of outstanding shares of our
common stock. We may grant awards under the plan to directors, officers, or
other key employees.

     We also have an equity incentive plan for non-employee directors that
authorizes us to issue and award options for up to 500,000 shares of common
stock. These options vest in three annual installments beginning on the date of
grant and on subsequent anniversaries, provided the eligible director continues
to serve as a director on each such anniversary. Options granted under the plan
are exercisable for ten years from the grant date.

                                       57



     We had a stock purchase plan that allowed eligible employees to purchase
our common stock at a discount to market value. We reserved 1,500,000 shares of
common stock for issuance under this plan. We suspended this employee stock
purchase plan effective December 31, 2000.

Stock option activity is as follows:



                                           Equity Incentive Plan      Directors Plan
                                           ---------------------   -------------------
                                                         Average               Average
                                                         -------               -------
                                           Number of     Option    Number of    Option
                                           ---------     ------    ---------    ------
                                            Shares       Price      Shares      Price
                                           ---------     ------     -------    -------
                                                                   
Balance, January 1, 1999 ..............    2,803,720       3.37      45,000       3.28
     Granted ..........................      449,425       3.22      40,000       4.19
     Exercised ........................      (79,323)      2.48          --         --
     Forfeited ........................     (178,078)      3.62          --         --
                                           ---------     ------     -------    -------
Balance, December 31, 1999 ............    2,994,744       3.36      85,000       3.71
     Granted ..........................      973,750       3.01      35,000       2.94
     Exercised ........................      (49,965)      2.37          --         --
     Forfeited ........................     (285,182)      3.42     (22,500)      3.61
                                           ---------     ------     -------    -------
Balance, December 31, 2000 ............    3,633,347       3.25      97,500       3.46
     Granted ..........................    1,834,250       0.71      30,000       2.00
     Exercised ........................       (2,000)      2.36          --         --
     Forfeited ........................     (512,778)      3.39          --         --
                                           ---------     ------     -------    -------
Balance, December 31, 2001 ............    4,952,819     $ 2.30     127,500    $  3.12
                                           =========     ======     =======    =======
Shares exercisable at December 31, 2001    2,653,498     $ 3.27      67,506    $  3.50
                                           =========     ======     =======    =======
Shares exercisable at December 31, 2000    2,359,033     $ 3.37      35,000    $  3.54
                                           =========     ======     =======    =======
Shares exercisable at December 31, 1999    1,776,946     $ 3.40      15,000    $  3.28
                                           =========     ======     =======    =======


     The following table summarizes information about stock options outstanding
at December 31, 2001:



                          Options Outstanding               Options Exercisable
                  ------------------------------------    -----------------------
                                  Weighted
                                  --------
                                  Average     Weighted                   Weighted
                                  -------     --------                   --------
                                 Remaining     Average                   Average
                                 ---------     -------                   -------
   Range of         Number      Contractual   Exercise      Number       Exercise
   --------         ------      -----------   --------      ------       --------
exercise prices   Outstanding      Life         Price     Exercisable      Price
- ---------------   -----------      ----         -----     -----------     -------
                                                           
$0.56 to $0.69     1,746,500       9.90         $0.65             --      $ 0.00
$0.80 to $3.06     1,761,558       7.03          2.68      1,212,805        2.67
$3.14 to $4.43     1,481,036       6.40          3.71      1,416,974        3.72
$4.45 to $4.76        91,225       5.85          4.59         91,225        4.59
                   ---------       ----         -----      ---------      -------
$0.56 to $4.76     5,080,319       7.81         $2.32      2,721,004      $ 3.28
                   =========       ====         =====      =========      =======


     We have adopted the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation."
Accordingly, we apply Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," in accounting for the equity incentive plans and
no compensation cost has been recognized as all grants have been made at fair
value.

     Pro forma information regarding net income and earnings per share is
required by Statement of Financial Accounting Standards No. 123, and has been
determined as if we had accounted for our employee stock options using the fair
value method. The weighted average fair value of the options granted was $0.40,
$1.88 and $1.49 during 2001, 2000, and 1999, respectively. The fair value for
these options was estimated at the date of grant using a Black-Scholes option
pricing model with the following weighted average assumptions:

                                           2001         2000         1999
                                           ----         ----         ----

Risk-free interest rate............        5.60%        6.70%        6.70%
Dividend rate......................          --           --           --

                                       58



Volatility factor..................        0.68         0.59         0.56

Weighted average expected life.....        2.83 years   2.83 years   2.63 years

     Our pro forma net income (loss) and basic earnings (loss) per share as if
the fair value method had been applied were as follows:

                                        2001        2000       1999
                                      --------    --------    ------
Pro forma net income (loss).......    $(19,424)   $(11,585)   $6,185
Basic earnings (loss) per share...      $(0.53)     $(0.34)    $0.22

     The effects of applying Statement of Financial Accounting Standards No. 123
for disclosing compensation costs may not be representative of the effects on
reported net income (loss) and earnings (loss) per share for future years.

11.  Commitments and Contingencies

     We lease 48 limited-service hotels under non-cancelable participating
leases with remaining initial terms ranging from 9 to 12 years, expiring through
2013. The total amount payable on these participating leases was $4,829 and
$11,526 at December 31, 2001, and 2000, respectively. We also lease apartments
for our Corporate Housing operations and corporate office space. Future minimum
lease payments required under these operating leases as of December 31, 2001
were as follows:

2002..........     $60,484
2003..........      42,278
2004..........      40,148
2005..........      39,657
2006..........      38,381
Thereafter....     225,566
                  --------
                  $446,514
                  ========

     We received notification from the NYSE that we are not in compliance with
the continued listing standards of the NYSE because our average closing share
price was less than $1.00 over a consecutive 30-day trading period. The NYSE's
continued listing standards require that we bring our 30-day average closing
price and our share price above $1.00 by June 20, 2002, subject to certain
conditions. We are currently evaluating our alternatives with regard to
complying to this standard.

     In the course of normal business activities, various lawsuits, claims and
proceedings have been or may be instituted or asserted against us. Based on
currently available facts, we believe that the disposition of matters pending or
asserted will not have a material adverse effect on our consolidated financial
position, results of operations or liquidity.

12.  Segments

     We are organized into two operating divisions: hotel management and
corporate housing, both of which are reportable operating segments. Each
division is managed separately because of its distinctive products and services.
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 four operating
divisions: hospitality management, corporate housing, golf management and
vacation ownership. In 2001, we reorganized our golf operations and included
them in our hotel management segment. We also eliminated our vacation ownership
segment in 2001. Accordingly, we reclassified the segment information for 2000
and 1999 to reflect the changes we made in 2001. We evaluate the performance of
each division based on earnings before interest, taxes, depreciation, and
amortization.



                                                       Hotel       Corporate                Financial
                                                       -----       ---------                ---------
                                                     Management     Housing     Other      Statements
                                                     ----------    --------    ---------   -----------
                                                                               
Year Ended December 31, 2001
Revenues .........................................   $  201,843     $103,733   $     298     $ 305,874
Earnings before interest, taxes, depreciation, and
   amortization ..................................       17,890        1,139     (24,134)       (5,105)
Total assets .....................................       22,692       19,108     201,137       242,937


                                       59



                                                                               
Year Ended December 31, 2000
Revenues .........................................   $1,345,144     $ 64,910   $     814   $ 1,410,868
Earnings before interest, taxes, depreciation, and
   amortization ..................................       16,718        4,650     (22,144)         (776)
Total assets .....................................      156,972       22,878     154,032       333,882

Year Ended December 31, 1999
Revenues .........................................   $1,292,221     $     --   $    (107)  $ 1,292,114
Earnings before interest, taxes, depreciation, and
   amortization ..................................       23,500           --        (236)       23,264
Total assets .....................................      111,216           --     146,928       258,144



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 includes merger and lease conversion
costs, charges to investments and advances to affiliates, restructuring charges
and impairment charges. The non-operating segment assets are primarily
unallocated corporate expenses and intangibles and other miscellaneous assets.

     Revenues for foreign operations for the years ended December 31 were as
follows:

                         2001      2000      1999
                        -------   -------   -------

Canada...............   $11,200   $27,724   $21,477
United Kingdom.......   $30,460   $16,152   $    --
   France               $   196   $    --   $    --

13.  Acquisitions

     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 4,072,000 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 Europe. The total purchase price of the acquisition was approximately
$37,605, which resulted in $34,335 of goodwill. We are amortizing the goodwill
on a straight line basis over 35 years. We accounted for the acquisition as a
purchase. Accordingly, we have included the operating results of BridgeStreet in
our consolidated financial statements since May 31, 2000, the date of
acquisition. The following table summarizes the acquisition:

Cash paid to BridgeStreet shareholders.............................   $ 12,216
MeriStar common stock issued to BridgeStreet shareholders..........     11,239
BridgeStreet debt repaid...........................................     12,021
Transaction costs..................................................      2,129
                                                                      --------
     Total cost of acquisition.....................................     37,605
Fair value of liabilities acquired.................................     14,001
Fair value of assets acquired......................................    (17,271)
                                                                      --------
Goodwill...........................................................   $ 34,335
                                                                      ========

     The following unaudited pro forma consolidated results of operations are
presented as if we had acquired BridgeStreet at the beginning of the periods
presented:

                                            Pro Forma Information
                                            ---------------------
                                                 (Unaudited)
                                                 -----------
                                              2000          1999
                                           ----------    ----------
Revenue...............................     $1,452,571    $1,387,669

                                       60



Net income (loss).....................     $  (10,325)   $    5,832
Diluted earnings (loss) per share.....     $    (0.30)   $     0.18

     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.

     On January 1, 2001 we acquired a 51% interest in Flagstone and on August
17, 2001, our corporate housing division acquired Paris based Apalachee Bay
Properties for approximately $1,500, of which approximately $760 is
accrued as of December 31, 2001. We accounted for these acquisitions using the
purchase method. These acquisitions were insignificant to our 2001 operations;
therefore we have not presented pro forma results.

14.  Merger and Lease Conversion Costs

     On February 26, 2001, we mailed a proxy to our shareholders seeking
approval of a merger agreement providing for a merger of a wholly-owned
subsidiary of American Skiing Company, a Delaware corporation, with and into our
company and the other transactions contemplated by that merger agreement. On
March 22, 2001, we and the other parties to the merger agreement mutually agreed
to terminate the merger agreement. There were no termination fees payable to any
of the parties. During the years ended 2001 and 2000, we incurred $4,239 and
$2,650, respectively, of expenses related to the proposed merger. These expenses
are included in our statements of operations.

     During 2000, we incurred $339 in costs related to the conversions of the
MeriStar Hospitality leases to management contracts.

15.  Charges to Investments in and Advances to Affiliates, Accounts and Notes
     Receivable, and Other

     During 2001, we recorded a charge in the amount of $16,098 to record an
allowance for accounts and notes receivables and to write-off the remaining book
values of impaired and abandoned assets. The following is a summary of the
amounts comprising this charge.

     .    During the first quarter of 2001, several of the hotels that we manage
          experienced severe financial difficulties, which affected the
          collectibility of our accounts and notes receivable from these hotels.
          One of the hotel owners filed for bankruptcy. The lender subsequently
          foreclosed on this hotel in early July 2001. We terminated our
          management agreement with another of the hotel owners in the second
          quarter of 2001. As a result, we fully provided for the amounts due
          from these entities in the amount of $5.1 million and recorded a
          charge to write-off other related assets in the amount of $1.8
          million.

     .    We also wrote-off our investments in an internet services company and
          certain real estate ventures. The internet services company
          significantly curtailed its operations during the first quarter of
          2001. We are involved in a dispute with our partners in the real
          estate ventures and believe that the recorded values of our
          investments in these real estate ventures have been impaired as a
          result of this dispute. We recorded a charge in the amount of $5.2
          million to reduce the book values of these assets.

     .    In connection with the conversion of our lease contracts to management
          contracts, we implemented changes to our business structure, which
          resulted in the abandonment of certain fixed assets totaling $2.9
          million.

     .    One of our former partners in our operating partnership claimed
          that we owed them special distributions under the partnership
          agreement. We have estimated the amount of distributions due to the
          former partner to be $325,000 which we accrued at March 31, 2001 and
          paid later in 2001.

     .    We exited three management contracts in October 2001. This resulted in
          uncollectible management fees and reimbursable expenses. We fully
          provided for the amount due from these entities in the amount of
          $798,000 in September 2001. We have not collected any amounts on these
          receivables.

                                       61



     .    We exited three management contracts in October 2001. This resulted in
          uncollectible management fees and reimbursable expenses. We fully
          provided for the amount due from these entities in the amount of
          $798,000 in September 2001. We have not collected any amounts on these
          receivables.

16.  Restructuring Expenses

     During the second quarter of 2001, we incurred restructuring charges in
connection with personnel changes primarily as a result of the change to
management contracts with MeriStar Hospitality and the termination of the merger
agreement with American Skiing Company. This restructuring is expected to reduce
our annualized corporate overhead expenditures by approximately 10%, or $3.5
million. The restructuring included eliminating approximately 55 corporate staff
positions that were no longer needed under the new structure.

     As a result of the restructuring, we recorded restructuring charges of $855
in 2001, none of which remains accrued at December 31, 2001. The restructuring
charge consisted of $842 of severance costs and $13 of non-cancelable lease
costs.

     During the third and fourth quarters of 2001, we restructured our corporate
housing division as a result of the slowdown in the economy and shifting focus
on certain markets. We incurred restructuring charges in connection with closing
offices in four BridgeStreet markets and realigned and eliminated certain
administrative functions. We eliminated approximately 54 positions as a result
of this restructuring. This restructuring is expected to reduce our annualized
expense by approximately $1.5 million. As a result of the restructuring, we
recorded restructuring charges of $1,219 in 2001. The restructuring charge
consisted of $133 of severance costs and $1,086 of non-cancelable lease costs.
We applied $133 and $881 in severance and lease termination costs, respectively,
against the restructuring accrual, of which $205 remains at December 31, 2001.

     During the fourth quarter of 2001, we recorded restructuring charges of
$1,405. This charge consisted entirely of severance-related costs, including the
accelerated vesting of restricted stock. This charge also represents the
elimination of approximately 15 corporate positions and is the result of
declines in our business due to the slowdown of the national economy and the
disruptions in business and leisure travel due to travel safety concerns since
the terrorist attacks on September 11, 2001. This restructuring is expected to
reduce our annualized expense by approximately $1.9 million. During 2001, $1,090
in severance was applied against the restructuring accrual, of which $315
remains at December 31, 2001.

17.  Quarterly Financial Information (Unaudited)

     The  following is a summary of our quarterly results of operations:



                                                        2001                                      2000
                                        -------------------------------------   -----------------------------------------
                                         First    Second     Third    Fourth     First      Second     Third      Fourth
                                         -----    ------     -----    ------     -----      ------     -----     --------
                                        Quarter   Quarter   Quarter   Quarter   Quarter    Quarter    Quarter     Quarter
                                        -------   -------   -------   -------   --------   --------   --------   --------
                                                                                         
Total revenue........................   $79,750   $83,517   $77,617   $64,990   $340,627   $372,684    355,858   $341,699
Total operating expenses.............    95,694    82,842    79,324    66,809    335,031    349,517    355,362    381,955
Net operating income (loss) .........   (15,944)      675    (1,707)   (1,819)     5,596     23,167        496    (40,256)
Net income (loss)....................   (10,826)   (1,120)   (2,282)   (4,721)     2,440     12,490       (901)   (23,409)
Diluted earnings (loss) per share....   $ (0.30)  $ (0.03)  $ (0.06)  $ (0.12)  $   0.08   $   0.37   $  (0.03)  $  (0.65)


     During the fourth quarter of 2001, we recorded a $1,649 restructuring
charge related to the elimination of corporate positions and estimated
non-cancelable lease costs related to the corporate housing division.

     During the fourth quarter of 2000, we recorded a $21,657 loss on asset
impairment related to our leased limited-service hotels. We also recognized
$2,989 of expenses related to our merger discussions with American Skiing
Company and the lease conversions of the MeriStar Hospitality leases.

18.  Supplemental Cash Flow Information



                                                                                     2001        2000        1999
                                                                                   --------    --------    --------
                                                                                                    



                                       62



                                                                                                   
Cash paid for interest and income taxes:
     Interest ..................................................................    $ 10,747    $  6,166    $  4,907
     Income taxes ..............................................................       1,582         722          36
Non-cash investing and financing activities:
     Conversion of operating partnership units to common stock .................       3,623         391       7,835
     Operating partnership units issued and/or assumptions of liabilities in ...
        purchase of intangible assets ..........................................          --          --       8,346
Issuance of common stock to BridgeStreet shareholders ..........................          --      11,239          --
Fair value of assets acquired ..................................................          --      17,271          --
Fair value of liabilities acquired .............................................          --      14,001          --
Fair value of debt assumed .....................................................          --      12,021          --

Operating assets and liabilities acquired from BridgeStreet Paris:
        Accounts receivable ....................................................          46          --          --
        Prepaid expenses and other .............................................          24          --          --
        Furniture, fixtures and other ..........................................           9          --          --
                                                                                    --------    --------    --------
Total operating assets acquired ................................................    $     79    $     --    $     --
                                                                                    ========    ========    ========
       Accounts payable and accrued expenses ...................................         232
       Income taxes ............................................................          20          --          --
                                                                                    --------    --------    --------
Total liabilities acquired .....................................................    $    252    $     --    $     --
                                                                                    ========    ========    ========

Operating assets and liabilities transferred in lease conversion:
       Accounts receivable .....................................................      52,072          --          --
       Prepaid expenses ........................................................       1,478          --          --
       Deposits and other ......................................................       6,462          --          --
       Furniture, fixtures and other, net ......................................         152          --          --
       Investments in and advances to affiliates ...............................       1,796          --          --
                                                                                    --------    --------    --------
Total operating assets transferred .............................................    $ 61,960    $     --    $     --
                                                                                    ========    ========    ========
Accounts payable and accrued expenses ..........................................      65,706          --          --
Long-term debt .................................................................          32          --          --
                                                                                    --------    --------    --------
Total liabilities transferred ..................................................    $ 65,738    $     --    $     --
                                                                                    ========    ========    ========



                                       63



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

     None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information required by Items 401 and 405 of Regulation S-K with
respect to our Directors and Executive Officers is incorporated herein by
reference to the sections entitled "Management" and "Principal Stockholders" in
our definitive proxy for our 2002 annual meeting of stockholders.

ITEM 11. EXECUTIVE COMPENSATION

     The information required by this item is incorporated herein by reference
to the sections titled "Executive Compensation," "Compensation of Directors"
and "Stock Option Grants" in our 2002 proxy statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required by this item is incorporated herein by reference
to the section titled "Principal Stockholders" in our 2002 proxy statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by this item is incorporated herein by reference
to the section titled "Certain Relationships and Related Transactions" in our
2002 Proxy Statement.

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

     (a)  Index to Financial Statements and Financial Statement Schedules

          1.   Financial Statements

               The  Financial Statements included in the Annual Report on Form
               10-K are set forth in Item 8.

          2.   Reports on Form 8-K - none

                                       64



(b)  Exhibits

     All Exhibits listed below are filed with this Annual Report on Form 10-K
     unless specifically stated to be incorporated by reference to other
     documents previously filed with the Commission.



Exhibit No.                   Description of Document
- -----------                   -----------------------
       
2.1       Acquisition Agreement, dated March 15, 1998, among MeriStar H&R Operating Company, L.P.,
          American General Hospitality, Inc. and AGHL GP, Inc. and certain other parties (incorporated
          by reference to Exhibit 2.1 to the Company's Form S-1/A filed with the Securities and
          Exchange Commission on June 5, 1998 (Registration No. 333-49881)).
2.2       Contribution, Assumption and Indemnity Agreement between CapStar Hotel Company and MeriStar
          H&R Operating Company, L.P. (incorporated by reference to Exhibit 99.4 to CapStar Hotel Company's
          Report on Form 8-K dated March 17, 1998).
2.3       Agreement and Plan of Merger by and among MeriStar Hotels & Resorts, Inc, MeriStar Brooklyn,
          Inc. and BridgeStreet Accommodations, Inc. dated as of March 23, 2000 (incorporated by
          reference to Exhibit 2 to the Company's Form 8-K filed with the Securities and Exchange
          Commission on March 24, 2000).
3.1       Amended and Restated Certificate of Incorporation of MeriStar Hotels & Resorts, Inc.
          (incorporated by reference to Exhibit 3.1 to the Company's Form S-1/A filed with the
          Securities and Exchange Commission on July 23, 1998 (Registration No. 333-49881)).
3.1.1     Certificate of Amendment of the Restated Certificate of Incorporation dated June 30, 2001.
3.2       By-laws of MeriStar Hotels & Resorts, Inc. (incorporated by reference to Exhibit 3.2 to the
          Company's Form S-1/A filed with the Securities and Exchange Commission on July 23, 1998
          (Registration No. 333-49881)).
4.1       Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company's
          Form S-1/A filed with the Securities and Exchange Commission on July 23, 1998 (Registration
          No. 333-49881)).
4.2       Preferred Share Purchase Rights Agreement, dated July 23, 1998, between MeriStar Hotels &
          Resorts, Inc. and the Rights Agent (incorporated by reference to Exhibit 4.4 to the Company's
          Form S-1/A filed with the Securities and Exchange Commission on July 23, 1998(Registration
          No. 333-49881)).
4.2.1     Form of Rights Certificate (incorporated by reference to Exhibit 4.3 to the Company's Form
          S-1/A filed with the Securities and Exchange Commission on July 23, 1998 (Registration No.
          333-49881)).
4.2.2     Amendment to Rights Agreement, dated December 8, 2000, between MeriStar Hotels & Resorts,
          Inc. and the Rights Agent (incorporated by reference to Exhibit 4.1 to the Company's Form
          8-K filed with the Securities and Exchange Commission on December 12, 2000).
4.3       Stock Purchase Agreement, dated March 31, 1999 (the "Stock Purchase Agreement"), between
          MeriStar Hotels & Resorts, Inc., Oak Hill Capital Partners, L.P. and Oak Hill Capital
          Management Partners, L.P. (incorporated by reference to Exhibit 4.5 to the Company's Form
          10-Q filed with the Securities and Exchange Commission for the three months ended March 31, 1999).
4.3.1     Amendment to the Stock Purchase Agreement (incorporated by reference to Exhibit 4.6 to the
          Company's Form 10-Q filed with the Securities and Exchange Commission for the three months ended
          March 31, 1999).
4.4       Registration Rights Agreement, dated March 31, 1999, between MeriStar Hotels & Resorts, Inc.,
          Oak Hill Capital Partners, L.P. and Oak Hill Capital Management Partners, L.P. (incorporated
          by reference to Exhibit 4.7 to the Company's Form 10-Q filed with the Securities and Exchange
          Commission for the three months ended March 31, 1999).
10.1      Amended and Restated Agreement of Limited Partnership of MeriStar H&R Operating Company, L.P.
          dated as of August 3, 1998 (incorporated by reference to Exhibit 10.11 to the Company's Form
          10-K filed with the Securities and Exchange Commission for the year ended December 31, 1998).
10.2      Senior Secured Credit Agreement dated as of February 29, 2000 between MeriStar H&R


                                       65



       
          Operating Company, L.P. and certain subsidiaries and Societe Generale,Southwest Agency and
          certain other parties (the "Senior Credit Agreement") (incorporated by reference to Exhibit
          10.11 to the Company's Form 10-K filed with the Securities and Exchange Commission for the year
          ended December 31, 1999).
10.2.1    First Amendment to the Senior Credit Agreement (incorporated by reference to Exhibit 10.16
          to the Company's Form 10-K filed with the Securities and Exchange Commission for the year ended
          December 31, 2000).
10.2.2    Second Amendment to the Senior Credit Agreement.
10.2.3    Third Amendment to the Senior Credit Agreement.
10.3      Intercompany Agreement between MeriStar Hospitality Corporation, MeriStar Hospitality
          Operating Partnership, L.P., MeriStar Hotel Lessee, Inc., MeriStar Hotels & Resorts, Inc. and
          MeriStar H&R Operating Company L.P. ("Intercompany Agreement")
10.3.1    Amendment to the Intercompany Agreement (incorporated by reference to Exhibit 10.15 to the
          Company's Form 10-K filed with the Securities and Exchange Commission for the year ended
          December 31, 2000).
10.4      Revolving Credit Agreement (the "Revolving Credit Agreement"), dated as of August 3, 1998, by
          and between MeriStar H&R Operating Company, L.P. and MeriStar Hospitality Operating
          Partnership, L.P. (incorporated by reference to Exhibit 10.9 to the Company's Form 10-K filed
          with the Securities and Exchange Commission for the year ended December 31, 1998).
10.4.1    Amendment to Revolving Credit Agreement (incorporated by reference to Exhibit 10.13 to the
          Company's Form 10-K filed with the Securities and Exchange Commission for the year ended
          December 31, 1999).
10.4.2    Second Amendment to Revolving Credit Agreement
10.5      Term Note by MeriStar H&R Operating Company, L.P. to MeriStar Hospitality Operating
          Partnership, L.P.
10.6      Agreement of Limited Partnership of MIP Lessee, L.P. (incorporated by reference to Exhibit
          10.12 to the Company's Form 10-Q filed with the Securities and Exchange Commission for the
          three months ended March 31, 1999).
10.7      MeriStar Hotels & Resorts, Inc. Incentive Plan (the "Incentive Plan") (incorporated by
          reference to Exhibit 10.6 to the Company's Form S-1/A filed with the Securities and Exchange
          Commission on June 19, 1998 (Registration No. 333-49881)).
10.7.1    Amendment to the Incentive Plan.
10.8      MeriStar Hotels & Resorts, Inc. Non-Employee Directors' Incentive Plan (the "Directors'
          Plan") (incorporated by reference to Exhibit 10.7 to the Company's Form S-1/A filed with the
          Securities and Exchange Commission on June 19, 1998 (Registration No. 333-49881)).
10.8.1    Amendment to the Directors' Plan.
10.9      MeriStar Hotels & Resorts, Inc. Employee Stock Purchase Plan.
10.10     Employment Agreement between MeriStar Hotels & Resorts, Inc., MeriStar Management Company,
          LLC and Paul W. Whetsell (incorporated by reference to Exhibit 10.1 to the Company's Form
          10-Q filed with the Securities and Exchange Commission for the three and nine months ended
          September 30, 2000).
10.11     Employment Agreement between MeriStar Hotels & Resorts, Inc. and Steven D. Jorns
          (incorporated by reference to Exhibit 10.2 to the Company's Form S-1/A filed with the
          Securities and Exchange Commission on June 19, 1998 (Registration No. 333-49881)).
10.12     Employment Agreement between MeriStar Hotels & Resorts, Inc., MeriStar Management Company,
          LLC and John Emery (incorporated by reference to Exhibit 10.14 to the Company's Form 10-Q
          filed with the Securities and Exchange Commission for the three and nine months ended
          September 30, 2000).
10.13     Employment Agreement between MeriStar Hotels & Resorts, Inc., MeriStar H&R Operating Company,
          LLC and James A. Calder (incorporated by reference to Exhibit 10.4 to the Company's Form
          S-1/A filed with the Securities and Exchange Commission on July 23, 1998 (Registration No.
          333-49881)).
10.14     Employment Agreement between MeriStar Hotels & Resorts, Inc., MeriStar Management



                                       66



       
          Company,LLC and Robert Morse.
10.15     Employment Agreement between MeriStar Management Company, LLC and Thomas Vincent.
21        Subsidiaries of the Company.
23        Consent of KPMG LLP.
24        Power of Attorney (see signature page).



                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, MeriStar Hotels & Resorts, Inc. has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.

                                      MERISTAR HOTELS & RESORTS, INC.


                                      By:/s/ PAUL W. WHETSELL
                                         --------------------
                                                     Paul W. Whetsell
                                           Chief Executive Officer and Chairman
                                                       of the Board

Dated:   March 5, 2002

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Paul W. Whetsell and Christopher L. Bennett, such
person's true and lawful attorneys-in-fact and agents, with full power of
substitution and revocation, for such person and in such person's name, place
and stead, in any and all capacities to sign any and all amendments (including
post-effective amendments) to this report filed pursuant to the requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, and to file the same
with all exhibits thereto, and the other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and things requisite and necessary to be done, as fully to all intents
and purposes as such person might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report and the foregoing Power of Attorney have been signed by the following
persons in the capacities and on the dates indicated.

     Signature                       Title                       Date
- --------------------      -----------------------------       -------------


                          Chief Executive Officer and         March 5, 2002
/s/ PAUL W. WHETSELL      Chairman of the Board of
- --------------------      Directors (Principal
  Paul W. Whetsell        Executive Officer)


/S/ STEVEN D. JORNS       Vice Chairman of the Board of       March 5, 2002
- -------------------       Directors
   Steven D. Jorns

                                       67




/s/ JOHN EMERY            President, Chief Operating          March 5, 2002
- --------------            Officer and Director
    John Emery


/s/ JAMES A. CALDER       Chief Financial Officer             March 5, 2002
- -------------------       (Principal Financial and
    James A. Calder       Accounting Officer)


/s/ J. TAYLOR CRANDALL    Director                            March 5, 2002
- ----------------------
    J. Taylor Crandall


/s/ LESLIE R. DOGGETT     Director                            March 5, 2002
- ---------------------
    Leslie R. Doggett


/s/ KENT R. HANCE         Director                            March 5, 2002
- -----------------
    Kent R. Hance


/s/ S. KIRK KINSELL       Director                            March 5, 2002
- -------------------
    S. Kirk Kinsell


/s/ JAMES MCCURRY         Director                            March 5, 2002
- -----------------
    James McCurry


/s/ JAMES R. WORMS        Director                            March 5, 2002
- ------------------
    James R. Worms

                                       68

EX-3.1.1

                                                                   Exhibit 3.1.1


                            CERTIFICATE OF AMENDMENT
                                     OF THE
                      RESTATED CERTIFICATE OF INCORPORATION
                                       OF
                         MERISTAR HOTELS & RESORTS, INC.

                     --------------------------------------
                     Pursuant to Section 242 of the General
                    Corporation Law of the State of Delaware
                     --------------------------------------

     Meristar Hotels & Resorts, Inc., a Delaware corporation (the
"Corporation"), does hereby certify as follows:

     FIRST: Article X of the Corporation's Restated Certificate of Incorporation
is hereby amended to read in its entirety as set forth below:

                                   "ARTICLE X

                       OWNERSHIP AND TRANSFER RESTRICTIONS

     A. Definitions. For the purposes of this Article the following terms shall
        -----------
have the following meanings:


     "Beneficial Ownership" shall mean ownership of Shares or MeriStar REIT
      --------------------
Equity Stock, as applicable, by a Person either directly or under the
constructive ownership rules of section 318(a) of the Code, as modified by
section 856(d)(5) of the Code. The terms "Beneficial Owner," "Beneficially
Owns," "Beneficially Own" and "Beneficially Owned" shall have the correlative
meanings.

     "Charitable Beneficiary" shall mean an organization or organizations
      ----------------------
described in sections 170(b)(1)(A) and 170(c) of the Code and identified by the
Board as the beneficiary or beneficiaries of the Excess Share Trust.

     "Code" shall mean the Internal Revenue Code of 1986, as amended from time
      ----
to time.

     "Covered Person" shall mean (i) a Person, who or which (ii) Beneficially
      --------------
Owns both outstanding shares of MeriStar REIT Equity Stock and Shares; provided
that (A) during such time as the MeriStar REIT Common Stock is regularly traded,
within the meaning of section 856(d)(3) of the Code, on the Exchange, clause
(ii) of this definition shall be applied in the case of MeriStar REIT Common
Stock by including only Persons who Beneficially Own outstanding shares of
MeriStar REIT Common Stock in excess of 5% of the total outstanding shares of
MeriStar REIT Common Stock and (B) during such time as the Common Stock of the
Corporation is regularly traded, within the meaning of section 856(d)(3) of the
Code, on the Exchange, clause (ii) of this definition shall be applied in the
case of Common Stock of the Corporation by including only Persons who




Beneficially Own outstanding shares of such Common Stock in excess of 5% of the
total outstanding shares of Common Stock of the Corporation. A Person shall also
be treated as a Covered Person if such Person does not Beneficially Own any
Shares, but a Transfer or attempted Transfer of Shares to such Person would have
been prohibited by this Article if such Person had already owned any Shares.

     "Excess Shares" shall mean Shares resulting from an event described in
      -------------
Section C of this Article.

     "Excess Share Trust" shall mean the trust created pursuant to Section C and
      ------------------
Section K of this Article.

     "Excess Share Trustee" shall mean a person, who shall be unaffiliated with
      --------------------
the Corporation, any Purported Beneficial Transferee and any Purported Record
Transferee, identified by the Board as the trustee of the Excess Share Trust.

     "Exchange" shall mean the New York Stock Exchange.
      --------

     "Fair Market Value" shall mean the last reported sales price on the
      -----------------
Exchange for Shares of the relevant class or series on the trading day
immediately preceding the relevant date, or if not then traded on the Exchange,
the last reported sales price for such Shares on the trading day immediately
preceding the relevant date as reported on any exchange or quotation system over
or through which such Shares may be traded, or if not then traded over or
through any exchange or quotation system, then the market price of such Shares
on the relevant date as determined in good faith by the Board.

     "MeriStar REIT Common Stock" shall mean all outstanding shares of common
      --------------------------
stock, par value $.01 per share, of MeriStar Hospitality Corporation, including
such shares that are held as Shares-in-Trust in accordance with Article V of the
charter of MeriStar Hospitality Corporation (or any successor provision of such
charter).

     "MeriStar REIT Equity Stock" shall mean all outstanding shares of stock of
      --------------------------
MeriStar Hospitality Corporation, including, without limitation, MeriStar REIT
Common Stock, and shall include shares of stock of MeriStar Hospitality
Corporation that are held as Shares-in-Trust in accordance with Article V of the
charter of MeriStar Hospitality Corporation (or any successor provision of such
charter).

     "Ownership Limit" shall mean 35%, of either (i) the total combined voting
      ---------------
power of all outstanding Shares entitled to vote or (ii) the total outstanding
Shares. The number and voting power of the outstanding Shares of any class or
series of the Corporation shall be determined by the Board in good faith, which
determination shall be conclusive for all purposes hereof.

     "Person" shall mean an individual, corporation, partnership, estate, trust
      ------
(including a trust qualified under section 401(a) or 501(c)(17) of the Code),
portion of a trust permanently set aside for or to be used exclusively for the
purposes described in

                                        2



section 642(c) of the Code, joint stock company or other entity and also
includes a group as that term is used for purposes of section 13(d)(3) of the
Securities Exchange Act of 1934, as amended.

     "Purported Beneficial Transferee" shall mean, with respect to any Excess
      -------------------------------
Shares, the Person who would have been the beneficial holder of the Shares, if
the Shares had not been transferred to the Excess Share Trust.

     "Purported Record Transferee" shall mean, with respect to any purported
      ---------------------------
Transfer which results in Excess Shares, the Person who would have been the
record holder of the Shares, if the Shares had not been transferred to the
Excess Share Trust.

     "REIT" shall mean a real estate investment trust under section 856 of the
      ----
Code.

     "Restriction Termination Date" shall mean such date as may be determined by
      ----------------------------
the Board as the date on which the ownership and transfer restrictions set forth
in this Article should cease to apply; provided that such date may not be prior
                                       --------
to the date on which MeriStar Hospitality Corporation makes a public
announcement that neither MeriStar Hospitality Corporation nor any affiliate of
MeriStar Hospitality Corporation that, directly or indirectly, has in effect any
management agreement or other similar service contract pursuant to which the
Corporation or any affiliate of the Corporation manages or operates any lodging
or related facility of MeriStar Hospitality Corporation or any of its
affiliates, intends to qualify as a REIT.

     "Shares" shall mean the shares of the Corporation as may be authorized and
issued from time to time pursuant to Article IV.

     "Transfer" shall mean any sale, transfer, gift, assignment, devise or other
      --------
disposition of Shares (including (a) the granting of any option or entering into
any agreement for the sale, transfer or other disposition of Shares, (b) the
sale, transfer, assignment or other disposition of any securities or rights
convertible into or exchangeable for Shares and (c) any transfer or other
disposition of any interest in Shares as a result of a change in the marital
status of the holder thereof), whether voluntary or involuntary, whether of
record, constructively or beneficially and whether by operation of law or
otherwise. The terms "Transfers" and "Transferred" shall have the correlative
meanings.

     B. Ownership Limitation.
        --------------------

         1. Subject to Clause 3 of this Section B, on any date prior to the
Restriction Termination Date, one or more Covered Persons who or which
Beneficially Own outstanding shares of MeriStar REIT Equity Stock in excess of
34.9% of the total outstanding shares of MeriStar REIT Equity Stock may not
Beneficially Own Shares in excess of the Ownership Limit;

                                        3



         2. Subject to Clause 3 of this Section B, until the Restriction
Termination Date, any Transfer that, if effective, would result in one or more
Covered Persons, who or which Beneficially Own outstanding shares of MeriStar
REIT Equity Stock in excess of 34.9% of the total outstanding shares of MeriStar
REIT Equity Stock, Beneficially Owning Shares in excess of the Ownership Limit
shall be void ab initio as to the Transfer of such Shares that would otherwise
be Beneficially Owned by any Covered Person or Persons as a result of such
Transfer and would result in one or more Covered Persons Beneficially Owning
Shares in excess of the Ownership Limit and the intended transferee or
transferees shall acquire no rights in such Shares; and

         3. Nothing contained in this Article shall preclude the settlement of
any transaction entered into through the facilities of the Exchange. The fact
that the settlement of any transaction occurs shall not negate the effect of any
other provision of this Article and any transferee in such a transaction shall
be subject to all of the provisions and limitations set forth in this Article.

     C. Excess Shares.
        -------------

         1. If, notwithstanding the other provisions contained in this Article,
at any time prior to the Restriction Termination Date, there is a purported
Transfer such that one or more Covered Persons, who or which Beneficially Own
outstanding shares of MeriStar REIT Equity Stock in excess of 34.9% of the total
outstanding shares of MeriStar REIT Equity Stock, would Beneficially Own Shares
in excess of the Ownership Limit (a "Prohibited Transfer"), then Shares
Beneficially Owned by the Covered Person or Persons who or which would otherwise
be the Beneficial Owner of Shares as a result of the Prohibited Transfer shall
be automatically designated as Excess Shares (without reclassification) until no
one or more Covered Persons, who or which Beneficially Own outstanding shares of
MeriStar REIT Equity Stock in excess of 34.9% of the total outstanding shares of
MeriStar REIT Equity Stock, Beneficially Own Shares in excess of the Ownership
Limit. The designation of such Shares as Excess Shares shall be effective as of
the close of business on the business day prior to the date of the purported
Transfer. If, after designation of such Shares owned directly by a Covered
Person as Excess Shares, one or more Covered Persons still Beneficially Own
Shares in excess of the Ownership Limit, Shares Beneficially Owned by such
Covered Person constructively as a result of the Prohibited Transfer shall be
designated as Excess Shares until no one or more Covered Person or Persons, who
or which Beneficially Own outstanding shares of MeriStar REIT Equity Stock in
excess of 34.9% of the total outstanding shares of MeriStar REIT Equity Stock,
Beneficially Own Shares in excess of the Ownership Limit. Where a Covered Person
Beneficially Owns Shares constructively through one or more Persons and the
Shares held by such other Persons must be designated as Excess Shares, the
designation of Shares held by such other Persons as Excess Shares shall be pro
rata.

         2. If, at any time prior to the Restriction Termination Date, an event
other than a purported Transfer (an "Event") occurs as a result of which one or
more Covered Persons, who or which Beneficially Own outstanding shares of
MeriStar REIT Equity Stock in excess of 34.9% of the total outstanding shares of
MeriStar REIT

                                        4



Equity Stock, would Beneficially Own Shares in excess of the Ownership Limit
(a "Prohibited Event"), then Shares Beneficially Owned by each such Covered
Person who or which would be otherwise the Beneficial Owner of Shares as a
result of the Prohibited Event shall be automatically designated as Excess
Shares to the extent necessary to eliminate such excess ownership. The
designation of Shares as Excess Shares shall be effective as of the close of
business on the business day prior to the date of the Event. In determining
which Shares are designated as Excess Shares, Shares Beneficially Owned by any
Covered Person who caused the Event to occur shall be designated as Excess
Shares before any Shares not so held are designated. Where several similarly
situated Covered Persons exist, the designation of Shares as Excess Shares shall
be pro rata. If Shares held by any Covered Person are required to be designated
as Excess Shares pursuant to this Clause 2 of this Section C of this Article,
Shares beneficially held by such Covered Person shall first be designated before
Shares Beneficially Owned constructively are designated. Where such Covered
Person Beneficially Owns Shares constructively through one or more Persons and
the Shares held by such other Persons must be designated as Excess Shares, the
designation of Shares held by such other Persons as Excess Shares shall be pro
rata.

     D. Prevention of Transfer. If the Board or its designee shall at any time
        ----------------------
determine in good faith that a Transfer has taken place in violation of Section
B of this Article or that a Person intends to acquire or has attempted to
acquire Beneficial Ownership (determined without reference to any rules of
attribution) of any Shares in violation of Section B of this Article, the Board
or its designee shall take such action as it deems advisable to refuse to give
effect to or to prevent such Transfer, including, but not limited to, refusing
to give effect to such Transfer on the books of the Corporation or instituting
proceedings to enjoin such Transfer; provided, however, that any Transfers or
                                     --------  -------
attempted Transfers in violation of Section B of this Article shall
automatically result in the designation and treatment described in Section C of
this Article, irrespective of any action (or non-action) by the Board.

     E. Notice to Corporation. Any Person who acquires or attempts to acquire
        ---------------------
Shares in violation of Section B of this Article, or any Covered Person who is a
transferee such that Excess Shares result under Section C of this Article, shall
immediately give written notice or, in the event of a proposed or attempted
Transfer, give at least 15 days prior written notice, to the Corporation of such
event. Such Person shall also provide to the Corporation such other information
as the Corporation may request in order to determine the effect, if any, of such
Transfer or attempted Transfer on the status of MeriStar Hospitality Corporation
or any affiliate of MeriStar Hospitality Corporation as a REIT and shall execute
and deliver such instruments and provide such further cooperation and assistance
as the Board deems advisable to preserve the status of MeriStar Hospitality
Corporation or any affiliate of MeriStar Hospitality Corporation as a REIT.

     F. Information for Corporation. Until the Restriction Termination Date,
        ---------------------------
each Covered Person who is a Beneficial Owner of Shares and each Covered Person
(including the stockholder of record) who is holding Shares for a Beneficial
Owner shall provide to the Corporation in writing such information with respect
to direct, indirect and

                                        5



constructive ownership of Shares as the Board deems reasonably necessary to
comply with the provisions of the Code applicable to the status of MeriStar
Hospitality Corporation or any of its affiliates as a REIT, to determine the
status of MeriStar Hospitality Corporation or any of its affiliates as a REIT,
or to comply with the requirements of any taxing authority or governmental
agency or to determine any such compliance.

     G. Other Action by Board. Subject to Section B of this Article, nothing
        ---------------------
contained in this Article shall limit the authority of the Board to take such
other action as it deems necessary or advisable to protect the status of
MeriStar Hospitality Corporation or any affiliate of MeriStar Hospitality
Corporation as a REIT.

     H. Ambiguities. In the case of an ambiguity in the application of any of
        -----------
the provisions of this Article, including any definition contained in Section A,
the Board shall have the power to determine the application of the provisions of
this Article with respect to any situation based on the facts known to it. In
the event this Article requires or permits an action by the Board and the
Certificate of Incorporation fails to provide specific guidance with respect to
such action, the Board shall have the power to determine the action to be taken
so long as such action is not contrary to the provisions of this Article.

     I. Legend. Each certificate for Shares shall bear substantially the
        ------
following legend:


          The securities represented by this certificate are subject to
          restrictions on ownership and transfer. This description is a
          summary only, and is qualified in its entirety by reference to
          the full transfer restrictions in the Certificate of
          Incorporation of MeriStar Hotels & Resorts, Inc. (the
          "Corporation"), a copy of which will be supplied free of
          charge at any stockholder's request. Except as otherwise
          provided pursuant to the Certificate of Incorporation of the
          Corporation, one or more Covered Persons, who or which
          Beneficially Own outstanding shares of MeriStar REIT Equity
          Stock in excess of 34.9% of the total outstanding shares of
          MeriStar REIT Equity Stock, may not Beneficially Own
          outstanding shares of the Corporation in excess of 35% of
          either (i) the total combined voting power of all outstanding
          shares entitled to vote or (ii) the total outstanding shares
          of the Corporation. Any Person who attempts or proposes to,
          alone or in combination with other Persons, Beneficially Own
          shares of the Corporation that would result in a violation of
          the above limitations must notify the Corporation in writing
          at least 15 days prior to such proposed or attempted Transfer.
          All capitalized terms not defined in this legend have the
          meanings defined in the Certificate of Incorporation of the
          Corporation, a copy of

                                        6



          which, including the restrictions on transfer, will be
          furnished to each stockholder on request and without charge.
          If the restrictions on transfer are violated, the securities
          represented hereby which are in excess of the above
          limitations will be designated and treated as Excess Shares
          which will be held in trust by the Excess Share Trustee for
          the benefit of the Charitable Beneficiary.

     Instead of the foregoing legend, the certificate may state that the
Corporation will furnish a full statement about certain restrictions on
transferability to a stockholder on request and without charge.

     J. Severability. If any provision of this Article or any application of any
        ------------
such provision is determined to be void, invalid or unenforceable by any court
having jurisdiction over the issue, the validity and enforceability of the
remaining provisions shall be affected only to the extent necessary to comply
with the determination of such court.

     K. Transfer of Excess Shares. Upon any purported Transfer that results in
        -------------------------
Excess Shares pursuant to Section C of this Article, such Excess Shares shall be
automatically transferred to the Excess Share Trustee, as trustee of a special
trust for the exclusive benefit of the Charitable Beneficiary. The Corporation
shall name a Charitable Beneficiary, if one does not already exist, within five
days of the discovery of any designation of any Excess Shares; however, the
failure to so name a Charitable Beneficiary shall not affect the designation of
Shares as Excess Shares or the transfer thereof to the Excess Share Trustee.
Excess Shares so held in trust shall be issued and outstanding Shares. The
Purported Record Transferee shall have no rights in such Excess Shares except as
expressly provided in this Article.

     L. Distributions on Excess Shares. Any dividends (whether taxable as a
        ------------------------------
dividend, return of capital or otherwise) on Excess Shares shall be paid to the
Excess Share Trust for the benefit of the Charitable Beneficiary. Upon
liquidation, dissolution or winding up, the Purported Record Transferee shall
receive, for each Excess Share, the lesser of (1) the amount per share of any
distribution made upon liquidation, dissolution or winding up and (2) the price
paid by the Purported Record Transferee for the Excess Shares, or if the
Purported Record Transferee did not give value for the Excess Shares, the Fair
Market Value of the Excess Shares on the day of the event causing the Excess
Shares to be held in trust. Any such dividend or distribution paid to the
Purported Record Transferee in excess of the amount provided in the preceding
sentence prior to the discovery by the Corporation that the Shares with respect
to which the dividend or distribution was made had been designated as Excess
Shares shall be repaid, upon demand, to the Excess Share Trust for the benefit
of the Charitable Beneficiary.

     M. Voting of Excess Shares. The Excess Share Trustee shall be entitled to
        -----------------------
vote the Excess Shares on behalf of the Charitable Beneficiary on any matter.
Subject to Delaware law, any vote cast by a Purported Record Transferee with
respect to the Excess Shares prior to the discovery by the Corporation that the
Excess Shares were held

                                        7



in trust will be rescinded ab initio; provided, however, that if the
                                      --------  -------
Corporation has already taken irreversible action with respect to a merger,
reorganization, sale of all or substantially all the assets, dissolution of the
Corporation or other action by the Corporation, then the vote cast by the
Purported Record Transferee shall not be rescinded. The owner of the Excess
Shares will be deemed to have given an irrevocable proxy to the Excess Share
Trustee to vote the Excess Shares for the benefit of the Charitable Beneficiary.

     Notwithstanding the provisions of this Article, until the Corporation has
received notification that Excess Shares have been transferred into an Excess
Share Trust, the Corporation shall be entitled to rely on its share transfer and
other stockholder records for purposes of preparing lists of stockholders
entitled to vote at meetings, determining the validity and authority of proxies
and otherwise conducting votes of stockholders.

     N. Non-Transferability of Excess Shares. Excess Shares shall be
        ------------------------------------
transferable only as provided in this Section N. At the direction of the Board,
the Excess Share Trustee shall transfer the Shares held in the Excess Share
Trust to a Person or Persons whose ownership of such Shares will not violate the
Ownership Limit. If such a transfer is made to such a Person or Persons, the
interest of the Charitable Beneficiary shall terminate and the designation of
such Shares as Excess Shares shall thereupon cease. The Purported Record
Transferee shall receive the lesser of (1) the price paid by the Purported
Record Transferee for the Excess Shares or, if the Purported Record Transferee
did not give value for the Excess Shares, the Fair Market Value of the Excess
Shares on the day of the event causing the Excess Shares to be held in trust,
and (2) the price received by the Excess Share Trust from the sale or other
disposition of the Excess Shares. Any proceeds in excess of the amount payable
to the Purported Record Transferee will be paid to the Charitable Beneficiary.
The Excess Share Trustee shall be under no obligation to obtain the highest
possible price for the Excess Shares. Prior to any transfer of any Excess Shares
by the Excess Share Trustee, the Corporation must have waived in writing its
purchase rights under Section O. It is expressly understood that the Purported
Record Transferee may enforce the provisions of this Section against the
Charitable Beneficiary.

     If any of the foregoing restrictions on transfer of Excess Shares is
determined to be void, invalid or unenforceable by any court of competent
jurisdiction, then the Purported Record Transferee may be deemed, at the option
of the Corporation, to have acted as an agent of the Corporation in acquiring
such Excess Shares in trust and to hold such Excess Shares on behalf of the
Corporation.

     O. Call by Corporation on Excess Shares. Excess Shares shall be deemed to
        ------------------------------------
have been offered for sale to the Corporation, or its designee, at a price equal
to the lesser of (a) the price paid by the Purported Record Transferee for the
Excess Shares or, if the Purported Record Transferee did not give value for the
Excess Shares, the Fair Market Value of the Excess Shares on the day of the
event causing the Excess Shares to be held in trust and (b) the Fair Market
Value of the Excess Shares on the date the Corporation, or its designee, accepts
such offer (the "Redemption Price"). The Corporation shall have the right to
accept such offer for a period of ninety days after the

                                        8



later of (x) the date of the purported Transfer which resulted in such Excess
Shares and (y) the date the Board determines in good faith that a purported
Transfer resulting in Excess Shares has occurred, if the Corporation does not
receive a notice of such purported Transfer pursuant to Section E of this
Article, but in no event later than a permitted Transfer pursuant to and in
compliance with the terms of Section N of this Article. Unless the Board
determines that it is in the interests of the Corporation to make earlier
payments of all of the amount determined as the Redemption Price in accordance
with the preceding sentence, the Redemption Price may be payable at the option
of the Board at any time up to but not later than the date five years after the
date the Corporation accepts the offer to purchase the Excess Shares. The
Corporation shall pay interest at the applicable federal rate under section
1274(d) of the Code, or any successor provision, to the Purported Record
Transferee.

     P. Underwritten Offerings. The Ownership Limit shall not apply to the
        ----------------------
acquisition of Shares or rights, options or warrants for, or securities
convertible into, Shares by an underwriter in a public offering, provided that
(i) the underwriter makes a timely distribution of such Shares or rights,
options or warrants for, or securities convertible into, Shares and (ii) the
underwriter, alone or in combination with one or more other Covered Persons,
does not Beneficially Own outstanding shares of MeriStar REIT Equity Stock in
excess of 34.9% of the total outstanding shares of MeriStar REIT Equity Stock.

     Q. Enforcement. The Corporation is authorized specifically to seek
        -----------
equitable relief, including injunctive relief, to enforce the provisions of this
Article.

     R. Non-Waiver. No delay or failure on the part of the Corporation or the
        ----------
Board in exercising any right hereunder shall operate as a waiver of any right
of the Corporation or the Board, as the case may be, except to the extent
specifically waived in writing.

     S. Amendment. Notwithstanding any other provision of this Certificate of
        ---------
Incorporation or the By-laws, the provisions of this Article shall not be
amended, altered, changed or repealed without the affirmative vote of all of the
directors of the Corporation who are not officers or employees of the
Corporation or any affiliate of the Corporation."

     SECOND: The foregoing amendment was duly adopted in accordance with Section
242 of the General Corporation Law of the State of Delaware.




                                        9



     IN WITNESS WHEREOF, MeriStar Hotels & Resorts, Inc. has caused this
certificate to be duly executed in its corporate name this 30th day of June,
2001.

                                   MERISTAR HOTELS & RESORTS, INC.


                                   By: /s/ Christopher L. Bennett
                                      ----------------------------
                                      Name:  Christopher L. Bennett
                                      Title: Vice President, Legal and
                                             Secretary

EX-10.2.2

                                                                  Exhibit 10.2.2


                               SECOND AMENDMENT TO
                         SENIOR SECURED CREDIT AGREEMENT

         SECOND AMENDMENT TO SENIOR SECURED CREDIT AGREEMENT (this "Amendment"),
dated as of April 6, 2001 (the "Amendment Date"), is among MERISTAR H & R
OPERATING COMPANY, L.P., a Delaware limited partnership, as the Borrower
("Borrower"); the Guarantors; SOCIETE GENERALE, SOUTHWEST AGENCY, as Arranger
and Administrative Agent (the "Administrative Agent"); and the Lenders a party
hereto.

                                    RECITALS:

         A. The Borrower; the Administrative Agent; CITIBANK/SALOMON SMITH
BARNEY, as Syndication Agent; LEHMAN BROTHERS, INC., as Documentation Agent; and
the Lenders are parties to that certain Senior Secured Credit Agreement, dated
as of February 29, 2000, as amended by First Amendment to Senior Secured Credit
Agreement, dated as of December 31, 2000 (the "Original Credit Agreement").

         B. The parties hereto desire to amend the Original Credit Agreement and
the other Credit Documents (as defined in the Original Credit Agreement) as
hereinafter provided.

         NOW, THEREFORE, for and in consideration of the covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:

         1. All terms used in this Amendment, but not defined herein, shall have
the meaning given such terms in the Original Credit Agreement.

         2. This Amendment shall become effective as of the Amendment Date if on
or prior to the close of business on April 20, 2001 (the "Termination Date") the
following conditions precedent have been satisfied:

         a. Documentation.  The Administrative Agent shall have received
            -------------
         counterparts of this Amendment executed by the Borrower, the Guarantors
         and the Required Lenders.

         b. Representations and Warranties. The representations and warranties
            ------------------------------
         contained in this Amendment, and in each Credit Document shall be true
         and correct in all material respects both as of the Amendment Date and
         the date the other conditions to this Amendment's effectiveness are
         satisfied except for changes which individually or in the aggregate do
         not constitute a Material Adverse Change.

         c. No Default. No Default or Event of Default shall exist as of either
            ----------
         the Amendment Date or the date the other conditions to this Amendment's
         effectiveness are satisfied.

If this Amendment does not become effective prior to the Termination Date, this
Amendment shall be null and void; provided however that the Borrower shall still
be obligated to reimburse



Societe Generale, Southwest Agency for costs and expenses incurred in connection
with this Amendment.

         3. The term "Credit Agreement" as used in the Credit Documents, shall
mean the Original Credit Agreement, as amended by this Amendment.

         4. From and after the Amendment Date, definition of "Permitted Housing
Business Leasing Guidelines" is amended by adding the phrase "(except for the
London metropolitan market for which the aggregate number may be 250 Units)"
after the phrase "100 Units".

         5. Each party hereto represents to the other parties hereto that such
party is authorized to execute this Amendment. In addition, the Borrower and the
Guarantors represent and warrant to the Lenders and the Administrative Agent
that (a) the representations and warranties contained in this Amendment, and in
each Credit Document are true and correct in all material respects as of the
Amendment Date except for changes which individually or in the aggregate do not
constitute a Material Adverse Change, (b) no Default or Event of Default exists
as of the Amendment Date, and (c) such Persons have no claims, offsets, or
counterclaims with respect to their respective obligations under the Credit
Documents as of the Amendment Date.

         6. Except as expressly provided in this Amendment, the terms and
provisions of the Original Credit Agreement remain in full force and effect and
are unmodified.

         7. This Amendment may be executed in multiple counterparts, each of
which shall be an original, but all of which shall constitute but one Amendment.



                                      -2-




[SIGNATURE PAGE OF SECOND AMENDMENT TO SENIOR SECURED CREDIT AGREEMENT]

         Executed as of the date first set forth above.

                                       BORROWER:
                                       --------


                                       MERISTAR H & R OPERATING COMPANY, L.P.

                                       By:  MeriStar Hotels & Resorts, Inc., its
                                            general partner


                                            By: /s/ John Emery
                                               ---------------------------------
                                            Name:   John Emery
                                                 -------------------------------
                                            Title:  President and COO
                                                  ------------------------------







[SIGNATURE PAGE OF SECOND AMENDMENT TO SENIOR SECURED CREDIT AGREEMENT]

                                       SOCIETE GENERALE, SOUTHWEST AGENCY,
                                       individually and as Arranger and
                                       Administrative Agent

                                       By: /s/ Thomas K. Day
                                          --------------------------------------
                                       Name:  Thomas K. Day
                                            ------------------------------------
                                       Title: Managing Director
                                             -----------------------------------







[SIGNATURE PAGE OF SECOND AMENDMENT TO SENIOR SECURED CREDIT AGREEMENT]



                                       CITIBANK/SALOMON SMITH BARNEY,
                                       individually and as Syndication Agent



                                       By: /s/ Michael S. Chlopak
                                          --------------------------------------
                                       Name:   Michael S. Chlopak
                                            ------------------------------------
                                       Title:  Vice President
                                             -----------------------------------






[SIGNATURE PAGE OF SECOND AMENDMENT TO SENIOR SECURED CREDIT AGREEMENT]



                                       CITICORP REAL ESTATE, INC.

                                       By: /s/ Michael S. Chlopak
                                          --------------------------------------
                                       Name:  Michael S. Chlopak
                                            ------------------------------------
                                       Title: Vice President
                                             -----------------------------------










[SIGNATURE PAGE OF SECOND AMENDMENT TO SENIOR SECURED CREDIT AGREEMENT]



                                       LEHMAN BROTHERS, INC.,
                                       individually and as Documentation Agent

                                       By: /s/ Francis X. Gilhool
                                          --------------------------------------
                                       Name:  Francis X. Gilhool
                                            ------------------------------------
                                       Title: Authorized Signatory
                                             -----------------------------------






[SIGNATURE PAGE OF SECOND AMENDMENT TO SENIOR SECURED CREDIT AGREEMENT]



                                       CREDIT LYONNAIS NEW YORK BRANCH

                                       By: /s/ Bruno DeFloor
                                          --------------------------------------
                                       Name:  Bruno DeFloor
                                            ------------------------------------
                                       Title: Vice President
                                             -----------------------------------







[SIGNATURE PAGE OF SECOND AMENDMENT TO SENIOR SECURED CREDIT AGREEMENT]



                                       THE BANK OF NOVA SCOTIA, acting through
                                       its New York Agency



                                       By: /s/ Bruce Ferguson
                                          --------------------------------------
                                       Name:  Bruce Ferguson
                                            ------------------------------------
                                       Title: Managing Director
                                             -----------------------------------






[SIGNATURE PAGE OF SECOND AMENDMENT TO SENIOR SECURED CREDIT AGREEMENT]

                        JOINDER, CONSENT AND RATIFICATION

         The Guarantors join in and consent to the terms and provisions of the
attached Amendment and agree that the Environmental Indemnification Agreement
and the Guaranty and Contribution Agreement (the "Guaranty") executed by the
Guarantors each dated February 29, 2000 remain in full force and effect, and
further that the Guaranteed Obligations (as defined in the Guaranty) include the
additional obligations of the Borrower under the attached Amendment.

         This Joinder, Consent and Ratification is dated as of the date of the
Amendment.

                                       GUARANTORS:

                                       MERISTAR HOTELS & RESORTS, INC.

                                           /s/ John Emery
                                       By:______________________________________

                                             John Emery
                                       Name:____________________________________

                                              President and COO
                                       Title:___________________________________


                                       MERISTAR MANAGEMENT COMPANY, L.L.C.,
                                       MERISTAR AGH COMPANY, L.L.C.
                                       CAPSTAR WINSTON COMPANY, L.L.C.
                                       CAPSTAR BK COMPANY, L.L.C.
                                       CAPSTAR KCII COMPANY, L.L.C.
                                       CAPSTAR ST. LOUIS COMPANY, L.L.C.
                                       MERISTAR LAUNDRY, LLC
                                       MERISTAR PRESTON CENTER, L.L.C.
                                       MERISTAR PINK SHELL, L.L.C.

                                       By:  MeriStar H & R Operating Company,
                                            L.P. their managing member

                                            By:  MeriStar Hotels & Resorts,
                                                 Inc., its general partner

                                                        /s/ John Emery
                                                 By:    ________________________

                                                        John Emery
                                                 Name:  ________________________

                                                        President and COO
                                                 Title: ________________________




[SIGNATURE PAGE OF SECOND AMENDMENT TO SENIOR SECURED CREDIT AGREEMENT]

                                       AGH LEASING, L.P.

                                       By:  MeriStar AGH Company, L.L.C., its
                                            general partner

                                            By:  MeriStar H & R Operating
                                                 Company, L.P. its sole member

                                                 By:  MeriStar Hotels & Resorts,
                                                      Inc., its general partner

                                                    /s/ John Emery
                                                 By:____________________________

                                                       John Emery
                                                 Name:__________________________

                                                        President and COO
                                                 Title:_________________________






[SIGNATURE PAGE OF SECOND AMENDMENT TO SENIOR SECURED CREDIT AGREEMENT]


                                       TWIN TOWERS LEASING, L.P.

                                       By:  AGH LEASING, L.P., its general
                                            partner

                                       By:  MeriStar AGH Company, L.L.C., its
                                            general partner

                                            By:  MeriStar H & R Operating
                                                 Company, L.P., its sole member

                                                 By:  MeriStar Hotels & Resorts,
                                                      Inc., its general partner

                                                    /s/ John Emery
                                                 By:____________________________

                                                        John Emery
                                                 Name: _________________________

                                                        President and COO
                                                 Title:_________________________


                                       CAPSTAR WYANDOTTE COMPANY, L.L.C.

                                       By:  CapStar KCII Company, L.L.C., its
                                            sole member

                                            By:  MeriStar H & R Operating
                                                 Company, L.P., its managing
                                                 member

                                                 By:  MeriStar Hotels & Resorts,
                                                      Inc., its general partner

                                                     /s/ John Emery
                                                 By:____________________________

                                                        John Emery
                                                 Name:__________________________

                                                        President and COO
                                                 Title:_________________________


                                       MERISTAR MANAGEMENT (CANMORE) LTD.

                                          /s/ John Emery
                                       By:______________________________________

                                              John Emery
                                       Name:____________________________________

                                              President and COO
                                       Title:___________________________________




[SIGNATURE PAGE OF SECOND AMENDMENT TO SENIOR SECURED CREDIT AGREEMENT]


                                       MERISTAR MANAGEMENT (VANCOUVER
                                       METROTOWN) LTD.

                                           /s/ John Emery
                                       By:______________________________________

                                             John Emery
                                       Name:____________________________________

                                              President and COO
                                       Title:___________________________________



                                       MERISTAR SOUTH SEAS PARTNERSHIP,
                                       LIMITED PARTNERSHIP

                                       By:  MeriStar South Seas, Inc., its
                                            general partner

                                                /s/ John Emery
                                            By:_________________________________

                                                  John Emery
                                            Name:_______________________________

                                                   President and COO
                                            Title:______________________________



                                       MERISTAR SOUTH SEAS, INC.

                                            /s/ John Emery
                                       By:______________________________________

                                             John Emery
                                       Name:____________________________________

                                              President and COO
                                       Title:___________________________________



                                       MERISTAR PALMAS CORP.

                                           /s/ John Emery
                                       By:______________________________________

                                             John Emery
                                       Name:____________________________________

                                              President and COO
                                       Title:___________________________________


                                       MERISTAR PALMAS LP, CORP.

                                           /s/ John Emery
                                       By:______________________________________

                                             John Emery
                                       Name:____________________________________

                                              President and COO
                                       Title:___________________________________




[SIGNATURE PAGE OF SECOND AMENDMENT TO SENIOR SECURED CREDIT AGREEMENT]


                                       MERISTAR PALMAS, L.P., S en C., (S.E.)

                                       By:  MeriStar Palmas Corp., its limited
                                            partner

                                            By:  MeriStar Hotels & Resorts,
                                                 Inc., its sole shareholder

                                                     /s/ John Emery
                                                 By:____________________________

                                                        John Emery
                                                 Name:__________________________

                                                        President and COO
                                                 Title:_________________________

EX-10.2.3

                                                                  Exhibit 10.2.3


                               THIRD AMENDMENT TO
                         SENIOR SECURED CREDIT AGREEMENT

     THIRD AMENDMENT TO SENIOR SECURED CREDIT AGREEMENT (this "Amendment"),
dated as of January 28, 2002 (the "Amendment Date"), is among MERISTAR H & R
OPERATING COMPANY, L.P., a Delaware limited partnership, as the Borrower
("Borrower"); the Guarantors; SOCIETE GENERALE, SOUTHWEST AGENCY, as Arranger
and Administrative Agent (the "Administrative Agent"); and the Lenders a party
hereto.

                                    RECITALS:

     A. The Borrower; the Administrative Agent; CITIBANK/SALOMON SMITH BARNEY,
as Syndication Agent; LEHMAN BROTHERS, INC., as Documentation Agent; and the
Lenders are parties to that certain Senior Secured Credit Agreement, dated as of
February 29, 2000, as amended by First Amendment to Senior Secured Credit
Agreement, dated as of December 31, 2000, as further amended by Second Amendment
to Senior Secured Credit Agreement, dated as of April 6, 2001 (the "Original
Credit Agreement").

     B. The Borrower; the Administrative Agent and the Lenders party thereto
executed an agreement titled Third Amendment to Senior Secured Credit Agreement
(the "Ineffective Amendment") dated August 1, 2001 that never became effective
and was terminated because the conditions precedent to the effectiveness of the
Ineffective Amendment were never satisfied.

     C. MeriStar Hospitality Operating Partnership, L.P., the subsidiary of MHC
which is the holder of the MHC Indebtedness (the "Subordinated Creditor") and
the Borrower desire to amend the MHC Indebtedness to make the terms and
provisions of the MHC Indebtedness consistent with the terms and provisions of
the Original Credit Agreement, as amended by this Amendment (the "MHC
Indebtedness Amendment").

     D. The Subordinated Creditor, the Administrative Agent and the Borrower
have entered into that certain Intercreditor Agreement (the "Original
Intercreditor Agreement") dated as of February 29, 2000, pursuant to which,
among other things, the MHC Indebtedness was subordinated to the Obligations.

     E. In connection with the Ineffective Amendment, the Borrower and the
Administrative Agent on behalf of the Lenders executed an agreement titled First
Amendment to Intercreditor Agreement dated August 1, 2001 that never became
effective and was terminated because the conditions precedent to the
effectiveness of such agreement were never satisfied.

     F. The Subordinated Creditor and its affiliates are the holders of
approximately $13,069,000 shown on the Borrower's September 30, 2001 financial
statements as "Due to MeriStar Hospitality Corporation" from the Borrower (the
"MHC Payable").

     G. The MHC Payable is to be converted into Subordinate Indebtedness (the
"MHC Additional Indebtedness") of the Borrower.



     H. The Subordinated Creditor and the Borrower desire to amend the Original
Intercreditor Agreement to (i) permit the MHC Indebtedness Amendment and (ii)
subordinate the MHC Additional Indebtedness to the Obligations.

     I. The Borrower, the Administrative Agent and the Lenders party thereto
executed that certain Waiver to Senior Secured Credit Agreement (the "Waiver"),
dated as of September 30, 2001.

     J. The parties hereto desire to amend the Original Credit Agreement and the
other Credit Documents (as defined in the Original Credit Agreement) as
hereinafter provided.

     NOW, THEREFORE, for and in consideration of the covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:

     1. All terms used in this Amendment, but not defined herein, shall have the
meaning given such terms in the Original Credit Agreement.

     2. This Amendment shall become effective as of the Amendment Date if on or
prior to the close of business on January 31, 2002 (the "Termination Date") the
following conditions precedent have been satisfied:

          a. Documentation. The Administrative Agent shall have received
             -------------
     counterparts of this Amendment executed by the Borrower, the Guarantors and
     the Super Required Lenders.

          b. Representations and Warranties. The representations and warranties
             ------------------------------
     contained in this Amendment, and in each Credit Document shall be true and
     correct in all material respects both as of the Amendment Date and the date
     the other conditions to this Amendment's effectiveness are satisfied except
     for changes which individually or in the aggregate do not constitute a
     Material Adverse Change.

          c. No Default. No material Default or Event of Default shall exist as
             ----------
     of either the Amendment Date or the date the other conditions to this
     Amendment's effectiveness are satisfied except for any such Default or
     Event of Default as is expressly waived or eliminated by this Amendment.

          d. Fees. The Administrative Agent shall have received for the benefit
             ----
     of those Lenders that execute and deliver this Amendment to the
     Administrative Agent's counsel by 5:00 p.m. CST on the Amendment Date a fee
     equal to fifty (50) basis points of each such Lender's Commitment as of the
     Amendment Date, as such Commitment is reduced pursuant to the provisions of
     this Amendment.

                                      -2-




          e. MHC Indebtedness Amendment. The MHC Indebtedness Amendment shall
             --------------------------
     have been consummated pursuant to documentation in form and substance
     reasonably acceptable to the Administrative Agent.

          f. MHC Other Indebtedness. The MHC Payable shall have been converted
             ----------------------
     to permitted Subordinate Indebtedness of the Borrower pursuant to
     documentation in form and substance reasonably acceptable to the
     Administrative Agent.

          g. Original Intercreditor Agreement; MHC Letter. The Original
             --------------------------------------------
     Intercreditor Agreement shall have been amended to (i) permit the MHC
     Indebtedness Amendment and (ii) subordinate the MHC Other Indebtedness to
     the Obligations pursuant to documentation in form and substance acceptable
     to the Administrative Agent in its sole discretion. MHC shall have
     acknowledged to the Administrative Agent for the benefit of the Lenders
     that the MHC Letter is in full force and effect pursuant to documentation
     in form and substance reasonably acceptable to the Administrative Agent.

          h. Permitted Property Agreements. The Permitted Property Agreements
             -----------------------------
     with MHC and MHC's Subsidiaries (excluding any Permitted Property
     Agreements for Hospitality Property's for which MHC or MHC's Subsidiary has
     pledged such Hospitality Property to secure convertible mortgage backed
     securities) shall have been amended to provide that no default shall be
     called and no termination right or other remedy shall be exercised against
     the Borrower or one of the Borrower's Subsidiaries, as applicable, under
     such agreement because of a shortfall in operating revenue or other
     economic performance by a Hospitality Property during the calendar years
     2001 and 2002 pursuant to documentation in form and substance reasonably
     acceptable to the Administrative Agent.

If this Amendment does not become effective prior to the Termination Date, this
Amendment shall be null and void; provided however that the Borrower shall still
be obligated to reimburse Societe Generale, Southwest Agency for costs and
expenses incurred in connection with this Amendment.

     3. The term "Credit Agreement" as used in the Credit Documents, shall mean
the Original Credit Agreement, as amended by this Amendment.

     4. From and after the Amendment Date, the definition of "Applicable Margin"
is amended by (a) deleting the phrase "one and one-half percent (1.50%)" and
replacing such phrase with the phrase "two and one-half percent (2.50%)" and (b)
deleting the phrase "three and one-half percent (3.50%)" in both places in such
definition where such phrase is used and replacing such phrase with the phrase
"four and one-half percent (4.50%)".

     5. From and after the Amendment Date, the definition of "EBITDA" is amended
by adding the phrase ", non-cash employee compensation up to $2,000,000 per
Fiscal Year in the aggregate commencing with the 2002 Fiscal Year" after the
word "amortization".

                                       -3-




     6. From and after the Amendment Date, the definition of "Indebtedness" is
amended by adding at the end of such definition the phrase "; provided that (a)
the Indebtedness of the Parent and the Parent's Subsidiaries shall not include
any Permitted Non-Recourse Unconsolidated Entity Indebtedness related to the
Parent's or the Parent's Subsidiary's Investment with respect to the St. Louis
Radisson Hotel and (b) for purposes of the financial covenants MHC Other
Indebtedness shall only be deemed Indebtedness for financial covenant
calculations which utilize the Parent's EBITDA for the Rolling Period ended
March 31, 2002 and following Rolling Periods".

     7. From and after the Amendment Date, the definition of "Minimum Net Worth"
is amended by adding before the period at the end of such definition the
phrase", minus (d) the Parent's write-off under GAAP of the Parent's or the
Parent's Subsidiary's Investment with respect to the St. Louis Radisson Hotel up
to a maximum write-off of $11,500,000".

     8. From and after the Amendment Date, the definition of "Permitted New
Investments" is amended by adding the following sentence at the end of such
definition:

        "Notwithstanding anything in this definition to the contrary, (a)
        Permitted New Investments shall not include any Capital Expenditures
        made pursuant to the provisions of Section 6.06(e) or Restricted
        Payments and (b) any Permitted New Investments made after January 1,
        2002 shall not exceed in the aggregate (i) without the written consent
        of the Super Required Lenders, $1,000,000, and (ii) without the written
        consent of all Lenders, $5,000,000."

     9. From and after the Amendment Date, the definition of "Permitted Other
Indebtedness" is amended by deleting the text in clause (b) in such definition
and replacing such text with the phrase "MHC Other Indebtedness".

     10. From and after the Amendment Date, the definition of "Repayment Event"
is amended by deleting all text after the phrase "Closing Date".

     11. From and after the Amendment Date, the following definition shall be
added to the Credit Agreement in the correct alphabetical order:

         "MHC Other Indebtedness" means Subordinate Indebtedness owed
          ----------------------
        by the Parent and the Parent's Subsidiaries to MHC or MHC's
        Subsidiaries which (i) refinances in its entirety the $13,069,000 shown
        on the Borrower's September 30, 2001 financial statements as "Due to
        MeriStar Hospitality Corporation" from the Borrower and any accrued
        interest thereon, (ii) is a term facility, not a revolver, (iii) has a
        maturity date on or after the date which is 91 days after the Maturity
        Date, as the Maturity Date may be extended, and (iv) has a non-default
        interest rate of 6.5% over LIBOR or less."

     12. The Borrower and the Lenders acknowledge that the Borrower has timely
provided the written notice of the Borrower's election to extend the Maturity
Date contemplated

                                      -4-



by Section 2.05(b)(ii); provided that this acknowledgement shall in no way be
                        --------
deemed a waiver of or acknowledgement of satisfaction of any of the other
conditions precedent to extending the Maturity Date contained in Section
2.05(b).

     13. From and after the Amendment Date, Section 2.05(c) is amended by
deleting the table is such section in its entirety and replacing such table with
the following table and sentence:

            "______Date________               Aggregate Lenders' Commitments
            -------------------               ------------------------------

            Amendment Date                            $82,500,000
            February 28, 2002                         $80,000,000
            June 30, 2002                             $77,500,000
            September 30, 2002                        $75,000,000
            December 31, 2002                         $72,500,000

In addition, on January 31, 2003 the Aggregate Lenders' Commitments will be
reduced to an amount equal to (i) $72,500,000 minus (ii) an amount equal to (A)
                                              -----
the Parent's EBITDA for the Rolling Period ended December 31, 2002 with the time
portion of the Parent's EBITDA for such Rolling Period for which the Parent does
not have actual results being estimated in good faith by Borrower minus (B)
                                                                  -----
$20,000,000, but in no event shall the amount calculated under this clause (ii)
be less than zero."

     14. From and after the Amendment Date, Section 2.13(a) is amended by
deleting the phrase "$10,000,000" and replacing such phrase with the phrase
"$2,000,000".

     15. From and after the Amendment Date, Section 4.05 of the Credit Agreement
is amended by adding the phrase "except as disclosed in the Parent's Form 10-Q
filed with the Securities and Exchange Commission in November 2001," after the
comma in the last sentence.

     16. From and after the Amendment Date, Section 4.08(a) is amended by
deleting clauses (iii) and (iv) and adding the word "and" immediately prior to
clause (ii).

     17. From and after the Amendment Date, Section 5.05 is amended by adding a
new paragraph (m) at the end of such section that reads as follows:

                 "(m) As soon as available, and in any event no later than the
        last day of the following month after the end of every fiscal month,
        the Borrower shall provide the Administrative Agent (for distribution
        to the Lenders) liquidity, cash flow and summary operating information
        for such fiscal month and detailed information related to the
        Borrower's Permitted Housing Business and Permitted Property
        Agreements, with all such information prepared by the Borrower in a
        form reasonably satisfactory to the Administrative Agent."

                                      -5-




     18. From and after the Amendment Date, Section 6.04 is amended by (a)
deleting the text in clause (d) in its entirety and replacing such text in such
clause with the phrase "[Intentionally Deleted]", (b) amending clause (a) by
deleting the phrase "(i)" and by deleting all text after the phrase "the
Parent," and replacing such text with the phrase "which distributions for
partners other than the Parent and the Parent's Subsidiaries in any Fiscal
Quarter do not in the aggregate exceed $24,000", and (c) deleting clause (f) of
such section in its entirety and replacing such clause with the following:

                 "(f) provided that (i) no Default has occurred and is
        continuing or would result therefrom, (ii) upon payment of such
        Restricted Payment and taking into consideration estimated future net
        cash flows, the Borrower would still have sufficient cash or Liquid
        Investments to make the next anticipated repayment of Advances required
        by the provisions of Sections 2.05(c) and 2.07(c), and (iii) the
        Interest Coverage Ratio shall not be less than the amount indicated
        below based upon the applicable Rolling Period, then the Borrower shall
        be entitled to pay interest (but not principal) on Subordinate
        Indebtedness permitted pursuant to this Agreement once per Fiscal
        Quarter at the end of a Fiscal Quarter:

             Ending Date of Rolling Period            Interest Coverage Ratio
             -----------------------------            -----------------------

             March 31, 2002                                   1.45
             June 30, 2002                                    1.55
             September 30, 2002                               1.85
             December 31, 2002                                2.00"

     19. From and after the Amendment Date, Section 6.06(e) is amended by (a)
adding the phrase", including Capital Expenditures," after the phrase "other
assets" and (b) adding the phrase"; provided, however, that from and after
                                    --------
January 1, 2002 the aggregate Investments made under this clause (e) shall not
in the aggregate exceed $2,000,000" after the word "Business".

     20. From and after the Amendment Date, the text in each of Sections 7.03
7.04, and 7.05 of the Credit Agreement is deleted in its entirety and replaced
in each section with the phrase "[Intentionally Deleted]".

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]


                                       -6-



     21. From and after the Amendment Date, Sections 7.01 7.02, 7.06 and 7.07 of
the Credit Agreement are deleted in their entirety and replaced with the
following in the applicable location in the Credit Agreement:

                 "Section 7.01 Interest Coverage Ratio. The Parent shall
                               -----------------------
        maintain at the end of each Rolling Period for the Rolling Periods
        ending on the dates indicated in the following chart an Interest
        Coverage Ratio of not less than the amount set forth next to such
        dates:

        Ending Date of Rolling Period                 Interest Coverage Ratio
        -----------------------------                 -----------------------

        December 31, 1999 through June 30, 2001             2.00 to 1.0
        September 30, 2001                                  1.50 to 1.0
        December 31, 2001                                   1.50 to 1.0
        March 31, 2002                                      1.35 to 1.0
        June 30, 2002                                       1.45 to 1.0
        September 30, 2002                                  1.75 to 1.0
        December 31, 2002                                   2.00 to 1.0"

                 "Section 7.02 Senior Interest Coverage Ratio. The Parent shall
                               ------------------------------
        maintain at the end of each Rolling Period for the Rolling Periods
        ending on the dates indicated in the following chart a Senior Interest
        Coverage Ratio of not less than the amount set forth next to such
        dates:

        Ending Date of Rolling Period           Senior Interest Coverage Ratio
        -----------------------------           ------------------------------

        December 31, 1999 through June 30, 2001         2.75 to 1.0
        September 30, 2001                              2.50 to 1.0
        December 31, 2001                               2.50 to 1.0
        March 31, 2002                                  2.35 to 1.0
        June 30, 2002                                   2.45 to 1.0
        September 30, 2002                              3.00 to 1.0
        December 31, 2002                               3.50 to 1.0"



                                      -7-



                 "Section 7.06 Leverage Ratio. The Parent shall not on any date
                               --------------
        permit the Leverage Ratio to exceed during the applicable period
        indicated in the following chart the amount set forth in such chart for
        such period:

                Applicable Period                            Leverage Ratio
                -----------------                            --------------

        prior to October 1, 2001                               4.00 to 1.0
        from October 1, 2001 through March 31, 2002            6.75 to 1.0
        from April 1, 2002 through June 30, 2002               8.25 to 1.0
        from July 1, 2002 through September 30, 2002           7.75 to 1.0
        from October 1, 2002 through December 31, 2002         6.50 to 1.0
        On and after January 1, 2003                           6.00 to 1.0"

                 "Section 7.07 Senior Leverage Ratio. The Parent shall not on
                               ---------------------
        any date permit the Senior Leverage Ratio to exceed during the
        applicable period indicated in the following chart the amount set forth
        in such chart for such period:

              Applicable Period                         Senior Leverage Ratio
              -----------------                         ---------------------

        prior to January 1, 2001                             3.50 to 1.0
        from January 1, 2001 through September 30, 2001      3.00 to 1.0
        from October 1, 2001 through March 31, 2002          4.75 to 1.0
        from April 1, 2002 through June 30, 2002             5.00 to 1.0
        from July 1, 2002 through September 30, 2002         4.75 to 1.0
        from October 1, 2002 through December 31, 2002       4.00 to 1.0
        On and after January 1, 2003                         3.50 to 1.0"

     22. From and after the Amendment Date, an additional paragraph is added to
the end of Article VII of the Credit Agreement which reads in its entirety as
follows:

        "In any Fiscal Quarter until the Borrower delivers the Compliance
        Certificate setting forth the EBITDA for the previous Rolling Period,
        with respect to the Leverage Ratio and Senior Leverage Ratio tests, the
        Parent shall remain subject to the applicable ratio limitation for the
        preceding Fiscal Quarter with the applicable test based upon the EBITDA
        for the previously reported Rolling Period."

     23. Each party hereto represents to the other parties hereto that such
party is authorized to execute this Amendment. In addition, the Borrower and the
Guarantors represent and warrant to the Lenders and the Administrative Agent
that (a) the representations and warranties contained in this Amendment, and in
each Credit Document are true and correct in all material respects as of the
Amendment Date except for changes which individually or in the aggregate do not
constitute a Material Adverse Change, (b) no Default or Event of Default exists

                                      -8-



as of the Amendment Date except for any such Default or Event of Default as
is expressly waived or eliminated by this Amendment, and (c) such Persons have
no claims, offsets, or counterclaims with respect to their respective
obligations under the Credit Documents as of the Amendment Date.

     24. Except as expressly provided in this Amendment, the terms and
provisions of the Original Credit Agreement remain in full force and effect and
are unmodified.

     25. This Amendment may be executed in multiple counterparts, each of which
shall be an original, but all of which shall constitute but one Amendment.



                                       -9-




[SIGNATURE PAGE OF THIRD AMENDMENT TO SENIOR SECURED CREDIT
AGREEMENT]

        Executed as of the date first set forth above.

                           BORROWER:
                           ---------

                           MERISTAR H & R OPERATING COMPANY,
                           L.P.

                           By:     MeriStar Hotels & Resorts, Inc., its general
                                   partner


                                   By: /s/ John Emery
                                   ----------------------------
                                   Name:   John Emery
                                   ----------------------------
                                   Title:  President & COO
                                   ----------------------------




[SIGNATURE PAGE OF THIRD AMENDMENT TO SENIOR SECURED CREDIT
AGREEMENT]

                                   SOCIETE GENERALE, SOUTHWEST
                                   AGENCY, individually and as Arranger
                                   and Administrative Agent


                                   By: /s/ Thomas K. Day
                                   ----------------------------
                                   Name:   Thomas K. Day
                                   ----------------------------
                                   Title:  Managing Director
                                   ----------------------------




[SIGNATURE PAGE OF THIRD AMENDMENT TO SENIOR SECURED CREDIT
AGREEMENT]

                                   LEHMAN BROTHERS, INC.,
                                   individually and as Documentation Agent


                                   By: /s/ Francis X. Gilhool
                                   ----------------------------
                                   Name:   Francis X. Gilhool
                                   ----------------------------
                                   Title:  Authorized Signatory
                                   ----------------------------




[SIGNATURE PAGE OF THIRD AMENDMENT TO SENIOR SECURED CREDIT
AGREEMENT]

                                   CITICORP REAL ESTATE, INC.


                                   By: /s/ Michael S. Chiopak
                                   --------------------------




[SIGNATURE PAGE OF THIRD AMENDMENT TO SENIOR SECURED CREDIT
AGREEMENT]

                        THE BANK OF NOVA SCOTIA, acting through
                        its New York Agency

                        By: /s/ Bruce Ferguson
                           ----------------------------
                        Name:   Bruce G. Ferguson
                             --------------------------
                        Title:  Managing Director
                              -------------------------




[SIGNATURE PAGE OF THIRD AMENDMENT TO SENIOR SECURED CREDIT
AGREEMENT]

                       JOINDER, CONSENT AND RATIFICATION

        The Guarantors join in and consent to the terms and provisions of the
attached Amendment and agree that the Environmental Indemnification Agreement
and the Guaranty and Contribution Agreement (the "Guaranty") executed by the
Guarantors each dated February 29, 2000 will remain in full force and effect,
and further that the Guaranteed Obligations (as defined in the Guaranty) include
the additional obligations of the Borrower under the attached Amendment.\

This Joinder, Consent and Ratification is dated as of the date of the Amendment.

                        GUARANTORS:

                        MERISTAR HOTELS & RESORTS, INC.

                        By: /s/ John Emery
                           ----------------------------
                        Name:   John Emery
                             --------------------------
                        Title:  President & COO
                              -------------------------

                        MERISTAR MANAGEMENT COMPANY, L.L.C.,
                        MERISTAR AGH COMPANY, L.L.C.
                        CAPSTAR WINSTON COMPANY, L.L.C.
                        CAPSTAR BK COMPANY, L.L.C.
                        CAPSTAR KCII COMPANY, L.L.C.
                        CAPSTAR ST. LOUIS COMPANY, L.L.C.
                        MERISTAR LAUNDRY, L.L.C.
                        MERISTAR PRESTON CENTER, L.L.C.
                        MERISTAR PINK SHELL, L.L.C.

                        By:    MeriStar H & R Operating Company, L.P.,
                               their managing member

                               By:   Meristar Hotel & Resorts, Inc., its general
                                     partner

                                     By: /s/ John Emery
                                        ----------------------------
                                     Name:   John Emery
                                        ----------------------------
                                     Title:  President & COO
                                           -------------------------




[SIGNATURE PAGE OF THIRD AMENDMENT TO SENIOR SECURED CREDIT
AGREEMENT]

                        AGH LEASING, L.P.

                        By:   MeriStar AGH Company, L.L.C., its general partner

                              By:    MeriStar H & R Operating Company, L.P.,
                                     its sole member

                                     By: Meristar Hotel & Resorts, Inc., its
                                         general partner

                                     By: /s/ John Emery
                                        ----------------------------
                                     Name:   John Emery
                                        ----------------------------
                                     Title:  President & COO
                                           -------------------------




[SIGNATURE PAGE OF THIRD AMENDMENT TO SENIOR SECURED CREDIT
AGREEMENT]

                        TWIN TOWERS LEASING, L.P.

                        By:   AGH LEASING, L.P., its general partner

                        By:   MeriStar AGH Company, L.L.C., its general partner

                              By:    MeriStar H & R Operating Company, L.P.,
                                     its sole member

                                     By: Meristar Hotel & Resorts, Inc., its
                                         general partner

                                     By: /s/ John Emery
                                        ----------------------------
                                     Name:   John Emery
                                        ----------------------------
                                     Title:  President & COO
                                           -------------------------

                        CAPSTAR WYANDOTTL COMPANY, L.L.C.

                        By:    CapStar KCII Company, L.L.C., its sole member

                               By:    MeriStar H & R Operating Company, L.P.,
                                      its managing member

                                      By:  MeriStar Hotels & Resorts, Inc., its
                                           general partner

                                           By: /s/ John Emery
                                              ----------------------
                                           Name:   John Emery
                                                --------------------
                                           Title:  President & COO
                                                 -------------------

                        MERISTAR MANAGEMENT (CANMORE) LTD.

                        By: /s/ John Emery
                           -----------------------------------------
                        Name:   John Emery
                             ---------------------------------------
                        Title:  President & COO
                              --------------------------------------




[SIGNATURE PAGE OF THIRD AMENDMENT TO SENIOR SECURED CREDIT
AGREEMENT]

                        MERISTAR MANAGEMENT (VANCOUVER
                        METROTOWN) LTD.

                        By: /s/ John Emery
                           ----------------------------
                        Name:   John Emery
                             ----------------------------
                        Title:  President & COO
                              ----------------------------

                        MERISTAR SOUTH SEAS PARTNERSHIP,
                        LIMITED PARTNERSHIP

                        By:     MeriStar South Seas, Inc., its general partner

                                By: /s/ John Emery
                                   ----------------------------
                                Name:   John Emery
                                     ----------------------------
                                Title:  President & COO
                                      ----------------------------

                        MERISTAR SOUTH SEAS, INC.

                        By: /s/ John Emery
                           ----------------------------
                        Name:   John Emery
                             ----------------------------
                        Title:  President & COO
                              ----------------------------

                        MERISTAR PALMAS CORP.

                        By: /s/ John Emery
                           ----------------------------
                        Name:   John Emery
                             ----------------------------
                        Title:  President & COO
                              ----------------------------

                        MERISTAR PALMAS LP CORP.

                        By: /s/ John Emery
                           ----------------------------
                        Name:   John Emery
                             ----------------------------
                        Title:  President & COO
                              ----------------------------




[SIGNATURE PAGE OF THIRD AMENDMENT TO SENIOR SECURED CREDIT
AGREEMENT]

                        MERISTAR PALMAS, L.P., Sen C., (S.E.)

                        By: MeriStar Palmas Corp., its limited partner

                              By:     Meristar Hotels & Resorts, Inc., its sole

                              By: /s/ John Emery
                              ----------------------------
                              Name:   John Emery
                              ----------------------------
                              Title:  President & COO
                              ----------------------------




[SIGNATURE PAGE OF THIRD AMENDMENT TO SENIOR SECURED CREDIT
AGREEMENT]

                        BRIDGESTREET ACCOMMODATIONS, INC.
                        a Delaware corporation

                        BRIDGESTREET ARIZONA, INC.
                        a Delaware corporation

                        BRIDGESTREET CALIFORNIA, INC.
                        a Delaware corporation

                        BRIDGESTREET COLORADO, INC.
                        a Delaware corporation

                        BRIDGESTREET MARYLAND, INC.
                        a Delaware corporation

                        BRIDGESTREET NEVADA, INC.
                        a Delaware corporation

                        BRIDGESTREET NORTH CAROLINA, INC.
                        a Delaware corporation

                        BRIDGESTREET RALEIGH, INC.
                        a Delaware corporation

                        CORPORATE LODGINGS, INC.
                        a Delaware corporation

                        TEMPORARY HOUSING EXPERTS, INC.
                        a Delaware corporation

                        TEMPORARY CORPORATE HOUSING, INC.
                        a Delaware corporation

                        By: /s/ John Emery
                        ----------------------------
                        Name:   John Emery
                        ----------------------------
                        Title:  President & COO
                        ----------------------------




[SIGNATURE PAGE OF THIRD AMENDMENT TO SENIOR SECURED CREDIT
AGREEMENT]

                        BRIDGESTREET TEXAS, L.P.
                        a Deleware limited partnership

                        By:   BridgeStreet Nevada, Inc.
                              a Delaware corporation, its general partner

                              By: /s/ John Emery
                              ----------------------------
                              Name:   John Emery
                              ----------------------------
                              Title:  President & COO
                              ----------------------------




[SIGNATURE PAGE OF THIRD AMENDMENT TO SENIOR SECURED CREDIT
AGREEMENT]

                        BRIDGESTREET CANADA, INC.
                        an Ontario (Canada) corporation

                        By: /s/ John Emery
                        ----------------------------
                        Name:   John Emery
                        ----------------------------
                        Title:  President & COO
                        ----------------------------

                        BRIDGESTREET ACCOMMODATIONS, LTD.
                        Incorporated under the laws of England and Wales

                        By: /s/ John Emery
                        ----------------------------
                        Name:   John Emery
                        ----------------------------
                        Title:  President & COO
                        ----------------------------

                        BRIDGESTREET LONDON, LTD.
                        Incorporated under the laws of England and Wales

                        By: /s/ John Emery
                        ----------------------------
                        Name:   John Emery
                        ----------------------------
                        Title:  President & COO
                        ----------------------------

                        BRIDGESTREET WARDROBE PLACE, LTD.
                        Incorporated under the laws of England and Wales

                        By: /s/ John Emery
                        ----------------------------
                        Name:   John Emery
                        ----------------------------
                        Title:  President & COO
                        ----------------------------

                        LORY(1), LTD.
                        Incorporated under the laws of England and Wales

                        By: /s/ John Emery
                        ----------------------------
                        Name:   John Emery
                        ----------------------------
                        Title:  President & COO
                        ----------------------------

EX-10.3

                                                                    Exhibit 10.3


                             INTERCOMPANY AGREEMENT


     THIS INTERCOMPANY AGREEMENT (the "Agreement") is made and entered into as
of August 3, 1998, 1998, among MeriStar Hospitality Corporation, a Maryland
corporation ("MSH"), MeriStar Hospitality Operating Partnership, L.P., a
Delaware limited partnership ("MSH OP" and together with MSH, the "MSH
Parties"), MeriStar Hotels & Resorts, Inc., a Delaware corporation ("OPCO") and
MeriStar H&R Operating Partnership, L.P., a Delaware limited partnership ("OPCO
OP") and together with OPCO, the "OPCO Parties").


                             W I T N E S S E T H :

     WHEREAS, MSH owns, directly or indirectly, a 1% general partnership
interest and an approximately 89% limited partnership interest, in MSH OP;

     WHEREAS, OPCO owns, directly or indirectly, a 1% general partnership
interest and an approximately 83% limited partnership interest, OPCO OP;

     WHEREAS, the MSH Parties may in certain circumstances determine that they
are precluded from pursuing, or are limited in the manner in which they purse,
various business opportunities due to the status of MSH as a real estate
investment trust ("REIT") under Sections 856 through 860 of the Internal Revenue
Code of 1986, as amended (the "Code");

     WHEREAS, OPCO is a newly created corporation that was formed for the
purposes of, among other things, becoming a lessee and operator of various types
of assets, including hotel properties owned by the MSH OP and its subsidiaries
and others; and

     WHEREAS, in light of the purposes for which OPCO was formed, the MSH
Parties and the OPCO Parties desire to enter into this Agreement in order (a) to
provide to each other a right of first opportunity with respect to certain
investment opportunities available to each of them, (b) for the OPCO Parties to
provide certain corporate and other general services to the MSH Parties, and (c)
to set forth certain terms regarding cooperation and coordination between the
MSH Parties and the OPCO Parties.

     NOW, THEREFORE, in consideration of the premises and mutual undertakings
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by each of the parties hereto, the
undersigned parties hereby agree as follows:





          1.   Definitions. Except as may be otherwise herein expressly
               -----------
provided, the following terms and phrases shall have the meanings set forth
below:

               (a)  "Change in Control" shall mean a change in ownership or
control of a party effected through either of the following transactions:

                    (i)  any person or related group of persons (other than such
party or a Controlled Affiliate of such party) directly or indirectly acquires
beneficial ownership (within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934, as amended) of securities possessing more than fifty
percent (50%) of the total combined voting power of such party's outstanding
securities; or

                    (ii) there is a change in the composition of such party's
Board of Directors over a period of thirty-six (36) consecutive months (or less)
such that a majority of Board members (rounded up to the nearest whole number)
ceases, by reason of one or more proxy contests for the election of Board
members, to be comprised of individuals who either (A) have been Board members
continuously since the beginning of such period or (B) have been elected or
nominated for election as Board members during such period by at least a
majority of the Board members described in clause (A) who were still in office
at the time such election or nomination was approved by the Board.

               (b)  "Company Affiliate" means any entity in which a majority of
the beneficial ownership interests are owned by MSH OP or by any entity
controlled by, controlling or under common control with MSH OP.

               (c)  "Controlled Affiliate" shall mean, with respect to any
party, any entity controlled by, controlling or under common control with such
party.

               (d)  "Governmental Authority" means any federal, state, local,
foreign or international court, government, department, commission, board,
bureau, agency, official or other regulatory, administrative or governmental
authority.

               (e)  "Information" means information, whether or not patentable
or copyrightable, in written, oral, electronic or other tangible or intangible
forms, stored in any medium, including studies, reports, records, books,
contracts, instruments, surveys, discoveries, ideas, concepts, know-how,
techniques, designs, specifications, drawings, blueprints, diagrams, models,
prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes,
communications by or to attorneys (including attorney-client privileged
communications), memos and other materials prepared by attorneys or under their
direction (including attorney work product), and other technical, financial,
employee or business information or data.


                                      -2-




               (f)  "Merger" means the merger of CapStar Hotel Company
("CapStar") with and into MSH pursuant to the Agreement and Plan of Merger among
CapStar, MSH, the MSH OP and the other parties specified therein, dated
March 15, 1998.

               (g)  "Registration Statement" means any registration statement
filed under the Securities Act that covers a Securities Issuance, including the
related prospectus, all amendments and supplements to such registration
statement (including post-effective amendments), all exhibits and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.

               (h) "REIT Opportunity" means a direct or indirect opportunity to
invest in (i) real estate or hotel properties, real estate mortgages, real
estate derivatives, or entities that invest primarily in or have a substantial
portion of their assets in the aforementioned types of real estate assets, or
(ii) any other investments which may be structured in a manner so as to be REIT-
Qualified Investments (as hereinafter defined), as determined by the MSH Parties
in their sole discretion. The MSH Parties shall have the right from time to time
to provide written notice to the OPCO Parties specifying certain criteria for a
REIT Opportunity in addition to the criteria specified above in this definition
of REIT Opportunity. Any such written notice from the MSH Parties may be
modified or canceled by written notice given by the MSH Parties at any time. The
definition of REIT Opportunity shall be modified as appropriate from time to
time in accordance with any such written notices sent by the MSH Parties.

               (i)  "Securities Act" means the Securities Act of 1933, as
amended.

               (j)  "Securities Issuance" means a private or public offering,
sale, issuance or delivery of, or commitment or agreement to commit to offer,
sell, issue or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any stock
of any class, any limited partnership interests or units, or any other debt or
equity securities (including, without limitation, indebtedness having the right
to vote, indebtedness convertible into any equity of any class or any other
securities), or equity equivalents of either (including, without limitation,
stock appreciation rights). Securities Issuance shall also mean any
reorganization, recapitalization, reclassification, stock dividend, stock split,
combination of shares, exchange of shares for other shares of the companies,
repurchase or redemption of shares, change in corporate structure or the like in
which the outstanding securities would be increased, decreased or changed into
or exchanged for a different number or kind of securities.

               (k)  "Tenant Opportunity" means the opportunity to become the
lessee under a mutually agreed upon lease arrangement of a property owned or
subsequently acquired by the MSH Parties if the MSH Parties, in their sole
discretion, determine that (i) consistent with MSH's status as a REIT, the MSH
Parties are required to enter into such a lease arrangement for such property,
including without limitation a hotel or similar type of facility and (ii) the
OPCO Parties or an entity that the OPCO Parties control is qualified to be the
lessee based on

                                      -3-



experience in the industry and financial and legal qualifications. A Tenant
Opportunity shall not include (1) a property which already has an existing
lessee as of the date of this Agreement (or, with respect to a property
acquired subsequent to the date of this Agreement, which has an existing binding
lessee arrangement that predates the acquisition of the property by the MSH
Parties), provided that the MSH Parties shall offer any such lessee interest to
the OPCO Parties if the lessee interest subsequently becomes available), (2) an
opportunity in which the seller of the property (or any affiliate or designee of
the seller) desires to enter into a lease agreement with the MSH Parties, or (3)
a property which has at any time been leased from any of the MSH Parties to any
of the OPCO Parties. The OPCO Parties shall have the right from time to time to
provide written notice to the MSH Parties specifying certain criteria for a
Tenant Opportunity in addition to the criteria specified above in this
definition of Tenant Opportunity. Any such written notice from the OPCO Parties
may be modified or canceled by written notice given by the OPCO Parties at any
time. The definition of Tenant Opportunity shall be modified as appropriate from
time to time in accordance with any such written notices sent by the OPCO
Parties.

          2.   MeriStar Right of First Opportunity
               -----------------------------------

               (a)  During the term of this Agreement, if the OPCO Parties
develop a REIT Opportunity, or if any REIT Opportunity otherwise becomes
available to the OPCO Parties, the OPCO Parties shall first offer such REIT
Opportunity to the MSH Parties. The offer shall be made by written notice (the
"OPCO Notice") from the OPCO Parties to the MSH Parties, which OPCO Notice shall
contain a detailed description of the material terms and conditions of the REIT
Opportunity. The MSH Parties shall have twenty days (the "Twenty-Day Period")
from the date of receipt of the OPCO Notice to notify the OPCO Parties in
writing that it has accepted or rejected the REIT Opportunity. If the MSH
Parties do not respond by the end of the Twenty-Day Period, the MSH Parties
shall be deemed to have rejected the REIT Opportunity. If the MSH Parties accept
a REIT Opportunity, but subsequently decide not to pursue such opportunity, or
for any other reason fail to consummate the REIT Opportunity, the MSH Parties
shall immediately provide written notice that they are no longer pursuing such
REIT Opportunity to the OPCO Parties. Notwithstanding the provisions set forth
in this Section 2(a), the OPCO Parties may make a limited minority investment or
contribution as part of a lease arrangement with a party that is not a
Controlled Affiliate of the OPCO Parties in a bona fide arm's-length
transaction; provided that such investment does not materially impact the OPCO
             --------
Parties' financial and legal qualifications to lease and manage additional
MeriStar properties.

               (b)  If the MSH Parties reject a REIT Opportunity, or accept such
REIT Opportunity but thereafter provide, or are required by the provisions
hereof to provide, written notice to the OPCO Parties that they are no longer
pursuing such REIT Opportunity, the OPCO Parties shall, for a period of one year
after the MSH Withdrawal Date (as hereinafter defined), be entitled to acquire
the REIT Opportunity (i) at a price, and on terms and conditions, that are not
more favorable to the OPCO Parties in any material respect than the price and
terms and conditions set forth in the OPCO Notice relating to such REIT
Opportunity or (ii) if the MSH Parties, at any time after the OPCO Notice,
negotiated a different price, terms or conditions with

                                      -4-




the seller, then at a price, and on terms and conditions, that are not more
favorable than, the price and terms and conditions negotiated by the MSH Parties
with the seller. If the OPCO Parties do not enter into a binding agreement to
acquire the REIT Opportunity within such one-year period, or if the price and
terms and conditions are more favorable to the OPCO Parties in any material
respect than the price and terms and conditions set forth in the OPCO Notice
(or, if applicable, than the price and terms and conditions negotiated by the
MeriStar Parties with the seller subsequent to the OPCO Notice), the OPCO
Parties shall again be required to comply with the procedures set forth above in
Section 2(a) if they desire to acquire such REIT Opportunity. The MSH Withdrawal
Date means any one of the following dates, as applicable: (i) the date that the
MSH Parties notify the OPCO Parties that they have rejected the REIT
Opportunity, (ii) if the MSH Parties do not respond to the OPCO Parties
regarding the REIT Opportunity, the expiration date of the Twenty-Day Period, or
(iii) if the MSH Parties accept the REIT Opportunity but subsequently cease to
pursue the opportunity, the earlier of (A) 30 days after the date on which the
MSH Parties cease to pursue the REIT Opportunity or (B) the date of receipt by
the OPCO Parties of written notice from the MSH Parties that they are no longer
pursuing the REIT Opportunity.

               (c)  The OPCO Parties agree to use their commercially reasonable
efforts to assist the MSH Parties in structuring and consummating any REIT
Opportunity accepted by the MSH Parties, on terms determined by the MSH Parties
(including without limitation structuring such investment opportunity as a
"REIT-Qualified Investment," as hereinafter defined). A "REIT-Qualified
Investment" means an investment, the income from which would qualify under the
95% gross income test set forth in Section 856(c)(2) of the Code, the ownership
of which would not cause a REIT to violate the asset limitations set forth in
Section 856(c)(5) of the Code, and which otherwise meets the federal income tax
requirements applicable to REITs. Any expenses incurred that are directly
related to structuring an investment as a REIT-Qualified Investment shall be
borne solely by the MSH Parties.

          3.   OPCO Right of First Opportunity for Tenant Opportunity.
               ------------------------------------------------------

               (a)  During the term of this Agreement, if the MSH Parties
develop a Tenant Opportunity, or if a Tenant Opportunity otherwise becomes
available to the MSH Parties, the MSH Parties shall first offer such Tenant
Opportunity to the OPCO Parties. The offer shall be made by written notice (the
"MSH Notice") from the MSH Parties to the OPCO Parties, which MSH Notice shall
contain a detailed description of the material terms and conditions under which
the MSH Parties propose to offer such Tenant Opportunity to the OPCO Parties.
The MSH Parties shall thereafter provide or cause to be provided promptly to the
OPCO Parties such additional information relating to the Tenant Opportunity as
the OPCO Parties reasonably may request. For a period of 30 days after the date
that the MSH Parties deliver the MSH Notice to the OPCO Parties, the MSH Parties
and the OPCO Parties shall negotiate with each other on an exclusive basis with
respect to such Tenant Opportunity. If the MSH Parties and the OPCO Parties are
unable to enter into a mutually satisfactory arrangement with respect to the
Tenant Opportunity within such 30-day period, or if the OPCO Parties indicate
that they are not

                                      -5-



interested in pursuing such Tenant Opportunity (in which event the OPCO Parties
shall provide written notice to the MSH Parties as soon as the OPCO Parties
decide against pursuing such opportunity), then the MSH Parties shall be free
for a period of one year after the expiration of such 30-day period to enter
into a binding agreement with respect to such Tenant Opportunity with any party
at a price and on terms and conditions that are not materially more favorable to
the tenant than the price and terms and conditions last proposed in writing by
the MSH Parties to the OPCO Parties. If the MSH Parties do not enter into a
binding agreement with respect to such Tenant Opportunity within such one-year
period, or if the price and terms and conditions are more favorable to the
tenant in any material respect than the price and terms and conditions last
proposed in writing by the MSH Parties to the OPCO Parties, the MSH Parties
shall again be required to comply with the procedures set forth above in this
Section 3(a) if they desire to pursue such Tenant Opportunity.

               (b)  The OPCO Parties agree to cooperate with the MSH Parties in
structuring all dealings with outside parties in connection with any Tenant
Opportunity that the OPCO Parties and the MSH Parties agree to enter into
pursuant to Section 3(a) above. The OPCO Parties agree to cooperate with the MSH
Parties in structuring any Tenant Opportunity with the MSH Parties as a
"REIT-Qualified Investment" for the MSH Parties. The MSH Parties shall have the
right, in their sole discretion, to structure any investment as a REIT-Qualified
Investment, even if such structuring prevents the MSH Parties from creating a
Tenant Opportunity for the OPCO Parties.

          4.   General Terms and Conditions for Rights of First Opportunity
               ------------------------------------------------------------

               (a)  Unless waived or agreed to as part of an investment or
otherwise provided in this Agreement, each party shall bear its own expenses
with respect to any opportunity to which this Agreement is applicable, and each
party agrees that it shall not be entitled to any compensation from the other
party with respect to any such opportunity.

               (b)  A party shall not be required to comply with the right of
first opportunity and notification requirements set forth in this Agreement
during any period in which the other party or any Controlled Affiliate of such
other party is in default of this Agreement or any other agreement entered into
by the parties hereto or any of their Controlled Affiliates, if such default is
material and remains uncured for fifteen days after receipt of notice thereof.

               (c)  Any opportunity which is offered to and accepted by the MSH
Parties under this Agreement may be entered into by or on behalf of the MSH
Parties or by any designee which is a Company Affiliate or Controlled Affiliate
of the MSH Parties. Any opportunity which is offered to and accepted by the OPCO
Parties under this Agreement may be entered into by or on behalf of the OPCO
Parties or by any designee which is a Controlled Affiliate of the OPCO Parties.

                                      -6-



               (d)  All rights of first opportunity set forth in this Agreement
shall be subordinated to any seller consent and confidentiality requirements; no
party shall be required to comply with the first opportunity set forth in this
Agreement if such compliance would violate any seller consent or confidentiality
requirements.

               (e)  While it is in the intention of the parties to align their
businesses in accordance with the terms of this Agreement, each party shall act
independently in its own best interest, and neither party shall be considered a
partner or agent of the other party or to owe any fiduciary or other common law
duties to the other party.

          5.   Provision of Certain Services.
               -----------------------------

               (a)  During the term of this Agreement, the OPCO Parties shall
provide the MSH Parties with such administrative, corporate, accounting,
financial, insurance, legal, tax, data processing, human resources and
operational services as the MSH Parties shall from time to time reasonably
request.

               (b)  The MSH Parties shall compensate the OPCO Parties for the
services provided to the MSH Parties under this Section 5 in an amount
determined in good faith by the OPCO Parties as the amount an unaffiliated third
party would charge the MSH Parties for comparable services and shall reimburse
the OPCO Parties for certain costs incurred and paid to third parties on behalf
of the MSH Parties. The OPCO Parties shall, on a monthly basis, provide the MSH
Parties with a statement setting forth its charges for such services and the MSH
Parties shall pay all undisputed charges within ten days of the receipt by the
MSH Parties of such monthly statement.

          6.   Non-Exclusive License.
               ---------------------

               (a)  Subject to the terms and conditions of this Agreement, the
OPCO Parties hereby grant to the MSH Parties, and the MSH Parties hereby accept,
a non-exclusive, royalty-free license to use "MeriStar Hospitality Corporation"
and other names that include "MeriStar Hospitality Corporation" (the "Licensed
Property") in the corporate name of the MSH Parties. The MSH Parties
acknowledge and agree that the terms of this Agreement shall not restrict the
ability of the OPCO Parties and its Affiliates to use the Licensed Property.

               (b)  Upon the termination of this Agreement pursuant to Section
12, (i) all rights of the MSH Parties to the Licensed Property shall immediately
terminate and the MSH Parties shall have no further rights with respect thereto;
(ii) the MSH Parties shall not offer any services in connection with the
Licensed Property or any confusingly similar Licensed Property and shall cease
all use of the Licensed Property (including, without limitation, the use of the
Licensed Property in the corporate name of the MSH Parties); and (iii) the MSH
Parties shall promptly cease any activity which suggests they have any rights to
the Licensed Property or that

                                      -7-




it has any association with the OPCO Parties, in either case except as may be
contemplated pursuant to any other agreement between the MSH Parties and the
OPCO Parties.

          7.   General Cooperation and Coordination.
               ------------------------------------

               (a)  The MSH Parties and the OPCO Parties hereby agree that it is
in the best interests of both entities and their shareholders that they
cooperate to the fullest extent possible in the conduct of their respective
operations with the goal of enhancing value to their respective shareholders. In
furtherance of the foregoing, meetings of the Boards of Directors of the MSH
Parties and the OPCO Parties may be held jointly if their respective Chairman or
Vice Chairmen so decide.

               (b)  The MSH Parties and the OPCO Parties each hereby agree to
establish, as promptly as practicable following the closing of the Merger, and
thereafter to continue in effect, a lease committee which shall negotiate and
review all hotel leases to be entered into between the MSH Parties and the OPCO
Parties. The MSH Parties' lease committee will consist of directors of MSH that
are not also directors of OPCO and the OPCO Parties' lease committee will
consist of directors of OPCO that are not also directors of MSH. The lease
committees of each of the MSH Parties and the OPCO Parties shall establish such
procedures for the conduct of their business as they shall deem appropriate from
time to time.

               (c)  MSH and OPCO shall make reasonable and ongoing efforts to
ensure that members of management of each of the MSH Parties and the OPCO
Parties are given appropriate salary, bonuses and options or other similar plans
to enhance value to the shareholders of both MSH and OPCO. The respective Board
of Directors of MSH and OPCO shall direct each of their compensation committees
to take into consideration the objective set forth in the previous sentence in
establishing compensation levels and performance criteria for management of MSH
and OPCO.

          8.   Procedures in Connection with Equity Offerings.
               ----------------------------------------------

               (a)  If either the MSH Parties or the OPCO Parties shall desire
to engage in a Securities Issuance (the "Issuing Party"), then such Issuing
Party shall give notice (an "Issuance Notice") to such other party (the
"Non-Issuing Party") as promptly as practicable of their desire to engage in a
Securities Issuance. Such Issuance Notice shall include the proposed material
terms of such issuance, to the extent determined by the Issuing Party, including
whether such issuance is proposed to be pursuant to a public or private
offering, the amount of securities proposed to be issued, and the manner of
determining the offering price and other terms thereof.

               (b)  Upon receipt of an Issuance Notice, the Non-Issuing Party
shall promptly cooperate with the Issuing Party in every way to effect such
Securities Issuance pursuant to the terms and schedule thereof as established by
the Issuing Party, including, without limitation, the following:

                                      -8-




                    (i)  Making available such members of the Non-Issuing
Party's management as shall be requested by the Issuing Party to assist in
effective such Securities Issuance;

                    (ii) In connection with a public offering, (A) assisting in
the preparation of and (B) executing and filing with the SEC, a Registration
Statement or Registration Statements under the Securities Act, including the
prospectus contained therein and any amendments or supplements thereto, or any
other statements, forms or documents required to be executed pursuant to law or
regulation with respect to be executed pursuant to law or regulation with
respect to such Securities Issuance, and, in connection therewith, providing the
Issuing Party with such information, including financial statements, market
studies, environmental and engineering reports and other data, as may be
required to be included in such Registration Statement pursuant to the terms of
the Securities Act;

                    (iii) Promptly notifying the Issuing Party of any
information that comes to the attention of the Non-Issuing Party which affects
or could affect such Securities Issuance, including, without limitation, the
occurrence of any event which makes any statement made in such Registration
Statement or related prospectus or any document incorporated or deemed to be
incorporated therein by reference or in any other offering document with respect
to such Securities Issuance untrue in any material respect or which requires the
making of any changes in such Registration Statement, prospectus or any such
offering document so that, in the case of the Registration Statement, it will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;

                    (iv) Cooperating with the Issuing Party in the preparation,
execution and filing of any documents required under the securities laws of any
state;

                    (v)  Cooperating with the Issuing Party to facilitate the
timely preparation and delivery of certificates, if any, representing the
Securities Issuance;

                    (vi) Obtaining any consents, approvals or authorizations of
Governmental Authorities and other third parties as are necessary in connection
with such Securities Issuance;

                    (vii) In connection with any underwritten public offering,
cause appropriate members of the Non-Issuing Party's management to cooperate and
participate on a reasonable basis in the underwriters' "road show" conferences
related to such offering; and

                    (viii) Performing any and all other acts and executing and
delivering any and all other certificates, instruments and other documents as
shall be requested by the Issuing Party to effect any such Securities Issuance.

                                      -9-




          9.   Exchange of Information.
               -----------------------

               (a)  Provision of Corporate Records; Agreement for Exchange of
                    ---------------------------------------------------------
Information.  From and after the date hereof, the MSH Parties and the OPCO
- -----------
Parties shall provide, or cause to be provided, to the other party and such
party's authorized accountants, counsel and other designated representatives, as
soon as reasonably practicable after written request therefor, reasonable access
to and duplicating rights with respects to any Information in the possession or
under the control of such party which the requesting party reasonably needs (i)
to comply with reporting, disclosure, filing or other requirements imposed on
the requesting party (including under applicable securities or tax laws) by a
Governmental Authority having jurisdiction over the requesting party, (ii) for
use in any other judicial, regulatory, administrative, tax or other proceeding
or in order to satisfy audit, accounting, claims, regulatory, litigation, tax or
other similar requirements, (iii) to comply with its obligations under this
Agreement, or (iv) for any other reasonable purpose; provided, however, that in
the event that any party determines that any such provision of Information is
reasonably likely to be commercially detrimental, violate any law or agreement,
or waive any attorney-client or work product privilege, the parties shall take
all reasonable measures to attempt to permit the compliance with such
obligations in a manner that avoids any such harm or consequence.

               (b)  Ownership of Information.  Any Information owned by one
                    ------------------------
party hereto that is provided to a requesting party pursuant to Section 9(a)
shall be deemed to remain the property of the providing party. Unless
specifically set forth herein, nothing contained in this Agreement shall be
construed as granting or conferring rights of license or otherwise to use any
such Information for any purpose other than those described in Section 6(a).

               (c)  Compensation for Providing Information. The party requesting
                    --------------------------------------
Information agrees to reimburse the other party for the reasonable costs, if
any, of gathering and copying such Information, to the extent that such costs
are incurred for the benefit of the requesting party. Except as may be otherwise
specifically provide elsewhere in this Agreement or in any other agreement
between the parties, such costs shall be computed in accordance with a
commercially reasonable procedure.

          10.  Specific Performance. Each party hereto hereby acknowledges that
               --------------------
the obligations undertaken by it pursuant to this Agreement are unique and that
the other party hereto would likely have no adequate remedy at law if such party
shall fail to perform its obligations hereunder, and such party therefor
confirms that the other party's right to specific performance of the terms of
this Agreement is essential to protect the rights and interests of the other
party.  Accordingly, in addition to any other remedies that a party hereto may
have at law or in equity, such party shall have the right to have all
obligations, covenants, agreements and other provisions of this Agreement
specifically performed by the other party hereto and the right to obtain a
temporary restraining order or a temporary or permanent injunction to secure
specific performance and to prevent a breach or threatened breach of this
Agreement by the other party

                                      -10-



hereto. Each party submits to the jurisdiction of the courts of the State of New
York for this purpose.

          11.  Affiliates. Each party hereto shall cause all entities that are
               ----------
under its control to comply with the terms hereof.

          12.  Term. The term of the Agreement shall commence as of the date of
               ----
this Agreement and shall terminate upon the earlier of (a) the tenth (10th)
anniversary of the date of this Agreement, and (b) a Change of Control of OPCO.
Notwithstanding the forgoing, (i) this Agreement shall terminate if MSH
terminates its REIT status for any reason, and (ii) a party hereto may terminate
this Agreement if the other party or any Controlled Affiliate of such other
party is in default of this Agreement or any other agreement entered into by the
parties hereto or any of their Controlled Affiliates, if such default is
material and remains uncured for fifteen days after receipt of notice thereof;
provided, however, that if such default cannot be reasonably corrected within
- -----------------
such 15 day period and such defaulting party is attempting in good faith to cure
such default, such 15 day period shall be extended for a period not more than
ninety days after receipt of notice thereof.

          13.  Miscellaneous.
               -------------

               (a)  Notices. Notices shall be sent to the parties at the
following address:

                    If to the MeriStar Parties:

                    MeriStar Hospitality Corporation
                    1010 Wisconsin Avenue, N.W.
                    Washington, D.C.  20007
                    Facsimile:  ____________________
                    Attention: President

                    If to the OPCO Parties:

                    MeriStar Hotels & Resorts, Inc.
                    1010 Wisconsin Avenue, N.W.
                    Washington, D.C.  20007
                    Facsimile:  ____________________
                    Attention: President


                                      -11-



               Notices may be sent certified mail, return receipt requested,
Federal Express or comparable overnight delivery service, or facsimile. Notice
will be deemed received on the fourth business day following deposit in U.S.
mail and on the first business day following deposit with Federal Express or
other delivery service, or transmission by facsimile. Any party to this
Agreement may change its address for notice by giving written notice to the
other party at the address and in a accordance with the procedures provided
above.

               (b)  Reasonable and Necessary Restrictions.  Each of the parties
                    -------------------------------------
hereto hereby acknowledges and agrees that the restrictions, prohibitions and
other provisions of this Agreement are reasonable, fair and equitable in scope,
term and duration, are necessary to protect the legitimate business interests of
the parties hereto and are a material inducement to the parties hereto to enter
into the transactions described in and contemplated by the recitals hereto. Each
party hereto covenants that it will not sue to challenge the enforceability of
this Agreement or raise any equitable defense to its enforcement.

               (c)  Successors and Assigns.  Except as provided in Section 12,
                    ----------------------
this Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and assigns. This Agreement shall not be
assigned without the express written consent of each of the parties hereto.

               (d)  Amendments; Waivers. No termination, cancellation,
                    -------------------
modification, amendment, deletion, addition or other change in this Agreement,
or any provision hereof or waiver of any right or remedy herein provided, shall
be effective for any purpose unless such change or waiver is specifically set
forth in a writing signed by the party or parties to be bound thereby, except
any addition or modifications to the definition of "REIT Opportunity" or "Tenant
Opportunity" as contemplated herein. The waiver of any right or remedy with
respect to any occurrence on one occasion shall not be deemed a waiver of such
right or remedy with respect to such occurrence on any other occasion.

               (e)  Choice of Law.  This Agreement and the rights and
                    -------------
obligations the parties hereunder shall be governed by the laws of the State of
New York, without regard to the principles of choice of law thereof.

               (f)  Severability. In the event that one or more of the terms or
                    ------------
provisions of this Agreement or the application thereof to any person(s) or in
any circumstance(s) shall, for any reason and to any extent to be found by a
court of competent jurisdiction to be invalid, illegal or unenforceable, such
court shall have the power, and hereby is directed, to substitute for or limit
such invalid term(s) or application(s) and to enforce such substituted or
limited terms or provisions or the application thereof. Subject to the
foregoing, the invalidity, illegality or enforceability of any one or more of
the terms or provisions of this Agreement, as the same may be amended from time
to time, shall not affect the validity, legality or enforceabliity of any other
terms or provision hereof.

                                      -12-



               (g)  Entire Agreement; No Third-Party Beneficiaries.  This
                    ----------------------------------------------
Agreement (i) constitutes the entire agreement and supersedes all prior
agreements, understandings, negotiations and discussions, whether written or
oral, between the parties hereto with respect to the subject matter hereof, so
that no such external or separate agreement relating to the subject matter of
this Agreement shall have any effect or be binding, unless the same is referred
to specifically in this Agreement or is executed by the parties after the date
hereof; and (ii) is not intended to confer upon any other person any rights or
remedies hereunder, and shall not be enforceable by any party not a signatory to
this Agreement.

               (h)  Gender; Number.  As the context requires, any word used
                    --------------
herein in the singular shall extend to and include the plural, any word used in
the plural shall extend to and included the singular and any word used in any
gender or the neuter shall extend to and include each other gender or be
neutral.

               (i)  Headings. The Headings if the sections hereof are inserted
                    --------
for convenience of reference only and are not intended to be a part of or affect
the meaning or interpretation of this Agreement or of any term or provision
hereof.

               (j)  Counterparts. This Agreement may be executed in two or more
                    ------------
counterparts, each of which together shall be deemed to be an original and all
of which together shall be deemed to constitute one and the same agreement.












                                      -13-




               IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by one of its duly authorized corporate officers, as of
the date first above written.


                                    MERISTAR HOSPITALITY CORPORATION



                                    By:  /s/ Bruce G. Wiles
                                        --------------------------
                                        Name: Bruce G. Wiles
                                        Title: President



                                    MERISTAR HOSPITALITY OPERATING
                                    PARTNERSHIP, L.P.
                                    By: MeriStar Hospitality Corporation,
                                        its general partner

                                    By:  /s/ Bruce G. Wiles
                                        --------------------------
                                        Name: Bruce G. Wiles
                                        Title: President



                                    MERISTAR HOTELS & RESORTS, INC.


                                    By:  /s/ James A. Calder
                                        --------------------------
                                        Name: James A. Calder
                                        Title: Chief Financial Officer


                                    MERISTAR H&R OPERATING
                                    PARTNERSHIP, L.P.
                                    By: MeriStar Hotels & Resorts, Inc.,
                                        its general partner


                                    By:  /s/ James A. Calder
                                        --------------------------
                                        Name: James A. Calder
                                        Title: Chief Financial Officer



                                      -14-

EX-10.4.2

                                                                  Exhibit 10.4.2


                 SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT

       SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT (this "Amendment"), dated
as of January 28, 2002 (the "Amendment Date"), between MERISTAR H & R OPERATING
COMPANY, L.P. ("Borrower") and MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.
("Lender").


                                    RECITALS

       A.     Lender and Borrower are parties to that certain Revolving Credit
Agreement, dated as of August 3, 1998, as amended by Amendment to Revolving
Credit Agreement dated as of February 29, 2000 (as so amended, the "Credit
Agreement").

       B.     Borrower; Societe Generale, Southwest Agency; as Arranger and
Administrative Agent; Citibank/Salomon Smith Barney, as Syndication Agent;
Lehman Brothers, Inc., as Documentation Agent; and the other lenders parties
thereto are parties to that certain Senior Secured Credit Agreement, dated as of
February 29, 2000, as amended by First Amendment to Senior Secured Credit
Agreement, dated as of December 31, 2000, as further amended by Second Amendment
to Senior Secured Credit Agreement, dated as of April 6, 2001 (the "Original
Senior Credit Agreement").

       C.     Contemporaneously with the execution of this Amendment, Borrower
and the other parties to the Original Senior Credit Agreement are entering into
that certain Third Amendment to Senior Secured Credit Agreement (the "Third
Senior Amendment" and, together with the Original Senior Credit Agreement, the
"Senior Credit Agreement").

       D.     Borrower and Lender desire to amend the Credit Agreement in
certain respects.

       NOW, THEREFORE, Borrower and Lender agree as follows:

       1.     This Amendment shall become effective on the effective date of the
Third Senior Amendment. If the Third Senior Amendment does not become effective
on or before February 28, 2002, then this Amendment shall be null and void. If
this Amendment shall become effective, then all of the provisions hereof shall
be effective as of the Amendment Date.

       2.     Sections 7.03 and 7.04 of the Credit Agreement are deleted in
their entirety.

       3.     Section 7.01 of the Credit Agreement is amended in its entirety to
read as follows:

       "Section 7.01 Total Interest Coverage Ratio. Parent shall maintain at the
                     -----------------------------
end of each Rolling Period for the Rolling Periods ending on the dates indicated
in the following chart a Total Interest Coverage Ratio of not less than the
amount set forth next to such dates:

Ending Date of Rolling Period                    Total Interest Coverage Ratio
- -----------------------------                    -----------------------------

December 31, 1999 through June 30, 2001                            2.00 to 1.0
September 30, 2001                                                 1.50 to 1.0
December 31, 2001                                                  1.50 to 1.0



March 31, 2002                                                       1.35 to 1.0
June 30, 2002                                                        1.45 to 1.0
September 30, 2002                                                   1.75 to 1.0
December 31, 2002 and thereafter                                     2.00 to 1.0

       4.     Section 7.02 of the Credit Agreement is amended in its entirety to
read as follows:

       "Section 7.02 Senior Interest Coverage Ratio. Parent shall maintain at
                     ------------------------------
the end of each Rolling Period for the Rolling Periods ending on the dates
indicated in the following chart a Senior Interest Coverage Ratio of not less
than the amount set forth next to such dates:

Ending Date of Rolling Period                    Senior Interest Coverage Ratio
- -----------------------------                    ------------------------------

December 31, 1999 through June 30, 2001                              2.75 to 1.0
September 30, 2001                                                   2.50 to 1.0
December 31, 2001                                                    2.50 to 1.0
March 31, 2002                                                       2.35 to 1.0
June 30, 2002                                                        2.45 to 1.0
September 30, 2002                                                   3.00 to 1.0
December 31, 2002 and thereafter                                     3.50 to 1.0

       5.     Section 7.05 of the Credit Agreement is amended in its entirety to
read as follows:

       "Section 7.06 Leverage Ratio. Parent shall not on any date permit the
                     --------------
Leverage Ratio to exceed during the applicable period indicated in the following
chart the amount set forth next to such period:

Applicable Period                                                 Leverage Ratio
- -----------------                                                 --------------

prior to October 1, 2001                                             4.00 to 1.0
from October 1, 2001 through March 31, 2002                          6.75 to 1.0
from April 1, 2002 through June 30, 2002                             8.25 to 1.0
from July 1, 2002 through September 30, 2002                         7.75 to 1.0
from October 1, 2002 through December 31, 2002                       6.50 to 1.0
On and after January 1, 2003                                         6.00 to 1.0

       6.     Section 7.06 of the Credit Agreement is amended in its entirety to
read as follows:

       "Section 7.07 Senior Indebtedness Leverage Ratio. Parent shall not on any
                     ----------------------------------
date permit the Senior Indebtedness Leverage Ratio to exceed during the
applicable period indicated in the following chart the amount set forth next to
such period:

Applicable Period                             Senior Indebtedness Leverage Ratio
- -----------------                             ----------------------------------

prior to January 1, 2001                                             3.50 to 1.0
from January 1, 2001 through September 30, 2001                      3.00 to 1.0
from October 1, 2001 through March 31, 2002                          4.75 to 1.0
from April 1, 2002 through June 30, 2002                             5.00 to 1.0

                                       2



from July 1, 2002 through September 30, 2002                         4.75 to 1.0
from October 1, 2002 through December 31, 2002                       4.00 to 1.0
On and after January 1, 2003                                         3.50 to 1.0

       7.     In any Fiscal Quarter until the Borrower delivers the Compliance
Certificate setting forth the EBITDA for the previous Rolling Period, with
respect to the Leverage Ratio and Senior Indebtedness Leverage Ratio tests,
Parent shall remain subject to the applicable ratio limitation for the preceding
Fiscal Quarter with the applicable test based upon the EBITDA for the previously
reported Rolling Period.

       8.     (a)    The definition of "EBITDA" is amended by (i) adding the
phrase ", non-cash employee compensation up to $2,000,000 per Fiscal Year in the
aggregate commencing with the 2002 Fiscal Year" after the word "amortization"
and (ii) adding the phrase "plus, to the extent deducted in determining Net
Income, deductions for minority interest attributable to the ownership interests
in Borrower not owned directly or indirectly by Parent."

       (b)    For purposes of calculating the Total Interest Coverage Ratio,
Senior Interest Coverage Ration, Leverage Ratio and Senior Indebtedness Leverage
Ratio, the EBITDA of Parent shall be adjusted to reflect the acquisition or
disposition during the applicable Rolling Period of any Lease, Management
Agreement or Investment in the manner and to the extent such adjustments are
made in the definition of "Adjusted EBITDA" in the Senior Credit Agreement.

       9.     The following definition is added to the Credit Agreement in
proper alphabetical order:

       "Term Note" shall mean that certain Term Note, dated as of January 1,
2002 made by Borrower to the order of Lender in the amount of $13,069,000, which
refinances in its entirety the amount shown on Parent's September 30, 2001
financial statements as "Due to MeriStar Hospitality Corporation."

       10.    The definition of "Indebtedness" is amended by adding at the end
of such definition the phrase "; provided that (i) the Indebtedness of the
Parent and the Parent's Subsidiaries shall not include any indebtedness related
to the Parent's or the Parent's Subsidiary's Investment with respect to the St.
Louis Radisson Hotel and (ii) for purposes of the financial covenants the
indebtedness evidenced by the Term Note shall only be deemed Indebtedness for
financial covenant calculations which utilize the Parent's EBITDA for the
Rolling Period ended March 31, 2002 and following Rolling Periods."

       11.    The definition of Leverage Ratio is amended by deleting the
semi-colon after the phrase "such date" in the third line thereof to a period
and deleting the balance of the definition.

       12.    A.     Borrower and Lender acknowledge the provisions of paragraph
18 of the Third Senior Amendment amending clause (f) of Section 6.04 of the
Senior Credit Agreement and agree that if Borrower is prevented from paying any
interest to Lender by virtue of such provisions that such unpaid interest shall
accrue and be payable on the Maturity Date or such earlier date on which
Borrower may be permitted to pay the same pursuant to such provisions.

       B.     Subject to the provisions of paragraph 12A of this Amendment and
notwithstanding Section 2.05 of the Credit Agreement, Borrower and Lender agree
that all interest accrued with respect to any Advance during any Fiscal Quarter
shall, regardless of the Applicable Interest Period, be payable on the earlier
of (i) the last day of such Fiscal Quarter or (ii) the Maturity Date.

                                        3



       13.    Section 4.05 of the Credit Agreement is amended by adding the
phrase "Except as disclosed in Parent's filings with the Securities and Exchange
Commission." at the end thereof.

       14.    A new clause (ii) is added to Section 9.01(e) of the Credit
Agreement reading as follows:

       "(ii)  Borrower shall fail to make any payment of principal or interest
with respect to the Term Note and such failure shall continue after any
applicable grace period."

       14.    Any defined terms used in this Amendment and not otherwise defined
shall have the meanings given to them in the Credit Agreement.

       15.    As amended hereby, the Credit Agreement is ratified and shall
remain in full force and effect.

       IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first written above.

                            MERISTAR H & R OPERATING COMPANY, L.P.

                            By:  MeriStar Hotels & Resorts, Inc., its general
                                 partner

                            By:  /s/ John Emery
                                 ---------------------------------
                                 Name:  John Emery
                                 Title: President and COO


                            MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

                            By:  MeriStar Hospitality Corporation, its general
                                 partner

                            By:  /s/ John Emery
                                 ---------------------------------
                                 Name:  John Emery
                                 Title: President and COO



                                        4

EX-10.5

                                                                    Exhibit 10.5


                                    TERM NOTE

Amount: $13,069,000                                       Date: January 1, 2002

               FOR VALUE RECEIVED, MERISTAR H&R OPERATING COMPANY, L.P.
("Maker"), a Delaware limited partnership, hereby promises to pay to MERISTAR
HOSPITALITY OPERATING PARTNERSHIP, L.P. or order ("Payee"), at 1010 Wisconsin
Avenue, Washington, D.C. 20007, or at such other place as Payee shall from time
to time designate, the principal amount of $13,069,000 together with interest on
the unpaid principal balance hereof from time to time at the "Interest Rate" (as
hereinafter defined).

         1.    Definitions.


        (a)    "Revolving Credit Agreement" shall mean that certain Revolving
Credit Agreement, dated as of August 3, 1998, as amended by Amendment to
Revolving Credit Agreement, dated as of February 29, 2000, and Second Amendment
to Revolving Credit Agreement, dated as of January 28, 2002.

        (b)    "Senior Credit Agreement" shall mean that certain Senior Secured
Credit Agreement, dated as of February 29, 2000, among Payee, Southwest Agency,
as arranger and administrative agent, Citibank/Salomon Smith Barney, as
syndication agent, Lehman Brothers, Inc., as documentation agent, and the other
lenders party thereto as amended by First Amendment to Senior Secured Credit
Agreement, dated as of December 31, 2000, Second Amendment to Senior Secured
Credit Agreement, dated as of April 6, 2001 and Third Amendment to Senior
Secured Credit Agreement (the "Third Senior Amendment"), dated as of January 28,
2002.

        (c)    "Interest Rate" shall mean a per annum rate equal to the lesser
of (a) sum of (i) "LIBOR" (as defined in the Revolving Credit Agreement)
determined as of the first day of each month during the term of this Note for a
one-month period plus (ii) 6.50% and (b) the "Maximum Rate" (as defined in the
Revolving Credit Agreement).

        (d)    "Maturity Date" shall mean the Maturity Date as defined in the
Revolving Credit Agreement.


         2.    Payments. (a) Subject to the provisions of Section 2(c) of this
Note, Maker shall pay interest to Payee on the outstanding principal amount
hereof at the Interest Rate in arrears on the last day of each calendar quarter
commencing March 31, 2002 until the Maturity Date.


        (b)    Maker shall repay the outstanding principal amount of this Note
together with all accrued and unpaid interest thereon on the Maturity Date.


        (c)    Maker and Payee acknowledge the provisions of paragraph 18 of the
Third Senior Amendment amending clause (f) of Section 6.04 of the Senior Credit
Agreement and agree that if Maker is prevented from paying any interest to Payee
by virtue of such provisions that such unpaid interest shall accrue and be
payable on the Maturity Date or such earlier date on which Maker may be
permitted to pay the same pursuant to such provisions.

         3.    Prepayment. This Note and the indebtedness hereby evidenced may

be prepaid, in whole or in part, together with accrued and unpaid interest
thereon at the election of Maker without payment of premium or penalty, upon ten
(10) days prior written notice to Payee.

         4.    Default; Acceleration. (a) An "Event of Default" shall occur
under this Note if (I) Maker shall to make any payment of interest when due and
such failure continues for a period of ten (10) days; (ii)




Maker shall fail to pay the principal amount of this Note when due; or (iii) any
"Event of Default" shall occur under the Revolving Credit Agreement.

        (b)    Upon the occurrence and during the continuance of any Event of
Default, Payee shall have the right upon written notice to the Maker to
accelerate the repayment of this Note and the indebtedness hereby evidenced.

         5.    Default Rate. Upon the occurrence and during the continuance of
any Event of Default, the unpaid principal balance of this Note shall bear
interest at the lesser of (a) the Interest Rate plus 3% per annum and (b) the
Maximum Rate.

         6.    Nature of Indebtedness. The indebtedness evidenced by this Note
refinances and replaces the amount shown on the September 30, 2001 financial
statements of MeriStar Hotels & Resorts, Inc., Maker's parent, as "Due to
MeriStar Hospitality Corporation," Payee's parent. The indebtedness evidenced by
this Note does not constitute an advance under, or any indebtedness pursuant to,
the Revolving Credit Agreement.

         7.    Costs. In addition to, and not in lieu of, any other sums
otherwise payable to Payee hereunder, Payee shall be entitled to reimbursement
from Maker for all reasonable costs, expenses and fees (including reasonable
attorney's fees) incurred by Payee in connection with the collection of this
Note and/or the indebtedness hereby evidenced.

         8.    Waivers. Maker hereby waives presentment, demand, protest, notice
of protest and notice of any other kind except for such notice as is expressly
provided for hereunder.

         9.    Governing Law. This Note shall be governed by the laws of the
State of New York.

        10.    Amendment; Waivers. No waiver or amendment of this Note may be
made other than in writing executed by Payee and Maker.

        11.    No Usury. This Note is subject to the express condition that at
no time shall Maker be obligated to pay any interest on the principal balance of
this Note at a rate in excess of the Maximum Rate. If by the terms of this Note,
Maker is obligated to pay interest at a rate in excess of the Maximum Rate, then
the Interest Rate or Default Rate, as applicable, shall be deemed immediately
reduced to the Maximum Rate and all previous payments in excess of the Maximum
Rate shall be deemed to have been payments in reduction of principal and not on
account of interest. All sums to be paid to Payee under this Note shall, to the
extent permitted by law, be amortized, prorated, allocated and spread over the
full term of this Note so that the rate of interest does not exceed the Maximum
Rate from time to time in effect.

        IN WITNESS WHEREOF, Maker has executed this Note as of the date first
written above.

                                 MERISTAR H&R OPERATING COMPANY, L.P.

                                 By:  MeriStar Hotels & Resorts, Inc.,
                                      its general partner

                                 By:  /s/ John Emery
                                      ---------------------------------
                                 Name:  John Emery
                                 Title: President and COO

EX-10.7.1

                                                                  Exhibit 10.7.1


                                AMENDMENT TO THE
                         MERISTAR HOTELS & RESORTS, INC.
                                 INCENTIVE PLAN

Pursuant to the approval by the Board of Directors of MeriStar Hotels & Resorts,
Inc. (the "Company") and the Company's shareholders at the Company's 1999 Annual
Meeting, the MeriStar Hotels & Resorts, Inc. Incentive Plan (the "Plan") is
amended, effective June 1, 1999, as follows:

         All references to "twelve (12%)" in Section 5.2 of the Plan are hereby
deleted and replaced by "fifteen (15%)".

IN WITNESS WHEREOF, MeriStar Hotels & Resorts, Inc. has caused this amendment to
the Plan to be duly executed in its corporate name this 1st day of June, 1999.

                                               MERISTAR HOTELS & RESORTS, INC.

                                              /s/ Christopher L. Bennett
                                              ---------------------------------
                                              Christopher L. Bennett
                                              VP, Legal and Secretary

EX-10.8.1

                                                                  Exhibit 10.8.1


                                AMENDMENT TO THE
                         MERISTAR HOTELS & RESORTS, INC.
                     NON-EMPLOYEE DIRECTORS' INCENTIVE PLAN

Pursuant to the approval by the Board of Directors of MeriStar Hotels & Resorts,
Inc. (the "Company") and the Company's shareholders at the Company's 2001 Annual
Meeting, the MeriStar Hotels & Resorts, Inc. Non-Employee Directors' Incentive
Plan (the "Plan") is amended, effective June 14, 2001, as follows:

     The reference to "125,000" in Section 6.2 of the Plan is hereby deleted and
replaced by "500,000".

IN WITNESS WHEREOF, MeriStar Hotels & Resorts, Inc. has caused this amendment to
the Plan to be duly executed in its corporate name this 14th day of June, 2001.


                                               MERISTAR HOTELS & RESORTS, INC.



                                               /s/ Christopher L. Bennett
                                               ---------------------------------
                                               Christopher L. Bennett
                                               VP, Legal and Secretary

EX-10.9

                                                                    Exhibit 10.9


                         MERISTAR HOTELS & RESORTS, INC.
                          EMPLOYEE STOCK PURCHASE PLAN




                                                                               2

                              ARTICLE I -- PURPOSE
                              --------------------

1.1      Purpose.
         -------

                  The Meristar Hotels & Resorts, Inc. Stock Purchase Plan (the
"Plan") is intended to provide a method whereby eligible employees of Meristar
Hotels & Resorts, Inc. (hereinafter referred to, unless the context otherwise
requires, as the "Company") and any Affiliated Entity will have an opportunity
to acquire a proprietary interest in the Company through the purchase of shares
of Common Stock of the Company.

                            ARTICLE II -- DEFINITIONS
                            -------------------------

2.1      Affiliated Entity.
         -----------------

                  "Affiliated Entity" means any corporation or partnership of
which a majority of the outstanding voting stock or voting power is beneficially
owned directly or indirectly by the Company, or any partnership in which the
Company is the general partner.

2.2      Base Pay.
         --------

                  "Base Pay" means base salary paid in each Offer Period.
Eligible compensation does not include overtime, bonuses, severance pay,
incentive pay, shift premium differentials, pay in lieu of vacation, imputed
income for income tax purposes, patent and award fees, awards and prizes, back
pay awards, reimbursement of expenses and living allowances, educational
allowances, expense allowances, disability benefits under any insurance program,
fringe benefits, deferred compensation, compensation under the Company's stock
plans, amounts paid for services as an independent contractor, or any other
compensation excluded by the Board of Directors in its discretion. Compensation
shall be determined before giving effect to any salary reduction agreement
pursuant to a qualified cash or deferred arrangement within the meaning of
Section 401(k) of the Code or to any similar reduction agreement pursuant to any
cafeteria plan (within the meaning of Section 125 of the Code).

2.3      Committee.
         ---------

                  "Committee" means the individuals described in Article XI.

2.4      Common Stock.
         ------------

                  "Common Stock" means common stock, par value $.01 per share,
of the Company.






                                                                               3

2.5      Common Stock Account.

                  "Common Stock Account" means the account established with, and
maintained by, the Custodian, for the purpose of holding Common Stock purchased
pursuant to this Plan.

2.6      Custodian.
         ---------

                  "Custodian" means the agent selected by the Committee to hold
Common Stock purchased under the Plan.

2.7      Employee.
         --------

                  "Employee" means, subject to Section 3.2, any person employed
by the Company whose customary employment is for twenty (20) or more hours per
week for the Company or any Affiliated Entity.

2.8      Offer Date.
         ----------

                  "Offer Date" means the date described in Section 4.2.

2.9      Offer Period.
         ------------

                  "Offer Period" means the period described in Section 4.2.

2.10     Offering Termination Date.

                  "Offering Termination Date" means the date described in
Section 4.2.

2.11     Option Percentage.
         -----------------

                  "Option Percentage" means the amount determined annually by
the Committee pursuant to Section 6.1.

2.12     Option Value.
         ------------

                  "Option Value" means the amount determined under Section 6.1.

2.13     Participant.
         -----------

                  "Participant" means any Employee who completes an
authorization for payroll deductions on a form provided by the Company and files
it with the Chief Financial Officer of the Company or his designee.

2.14     Payroll Deduction Account.

                  "Payroll Deduction Account" means the bookkeeping entry
established by the Company for each Participant pursuant to Section 5.2.






                                                                               4

2.15     Plan Administrator.

                  "Plan Administrator" means the Company or any third party
administrator designated by the Company.

2.16     Trading Day.
         -----------

                  "Trading Day" means a day on which shares of Common Stock are
traded on the New York Stock Exchange (or such other exchange on which the
Common Stock shall be principally traded).

                  ARTICLE III -- ELIGIBILITY AND PARTICIPATION
                  --------------------------------------------

3.1      Initial Eligibility.

                  Any Employee who shall have completed ninety (90) days'
employment and shall be employed by the Company on the date his participation in
the Plan is to become effective shall be eligible to participate in Offerings
(as hereinafter defined) under the Plan which commence on or after such ninety
day period has concluded.

3.2      Leave of Absence.
         ----------------

                  For purposes of participation in the Plan, a person on leave
of absence shall be deemed to be an Employee for the first ninety (90) days of
such leave of absence and such employee's employment shall be deemed to have
terminated at the close of business on the 90th day of such leave of absence
unless such employee shall have returned to regular full-time or part-time
employment (as the case may be) prior to the close of business on such 90th day.
Termination by the Company of any employee's leave of absence, other than
termination of such leave of absence on return to full time or part time
employment, shall terminate an employee's employment for all purposes of the
Plan and shall terminate such employee's participation in the Plan and right to
exercise any option.

3.3      Restrictions on Participation.

                  Notwithstanding any provisions of the Plan to the contrary, no
Employee shall be granted an option under the Plan:

                  (a) if, immediately after the grant, such Employee would own
stock, and/or hold outstanding options to purchase stock, possessing five
percent (5%) or more of the total combined voting power or value of all classes
of stock of the Company or any of its parent or any Affiliated Entity; or

                  (b) which permits his rights to purchase stock under all
employee stock purchase plans of the Company to accrue at a rate which exceeds
$25,000 in fair market value of the Common Stock (determined at the time such
option is granted) for each calendar year in which such option is outstanding.






                                                                               5

3.4      Commencement of Participation.

                  Subject to Section 8.2, an eligible Employee may become a
Participant by completing an authorization for payroll deductions on the form
provided by the Company and filing it with the office of the Chief Financial
Officer of the Company (or his designee) on or before the first day of the month
in which participation is to commence. Payroll deductions for a Participant
shall become effective as of the first payroll period ending in the month in
which participation commences and shall remain in effect until modified or
revoked by the Participant pursuant to Section 5.3 or Article VIII.

3.5      Custodial Account.
         -----------------

                  As a condition to participation in this Plan, each Eligible
Employee shall be required to hold shares of Common Stock purchased hereunder in
a Common Stock Account and such Employee's decision to participate in the Plan
shall constitute the appointment of the Custodian as custodial agent for the
purpose of holding such shares of Common Stock. Such Common Stock Account will
be governed by, and subject to, the terms and conditions of a written agreement
with the Custodian.

                             ARTICLE IV -- OFFERINGS
                             -----------------------

4.1      Number of Shares to be Offered.

                  The maximum number of shares of Common Stock of the Company
that may be purchased under the Plan is 1,500,000. Such shares may be treasury
shares or authorized and unissued shares, as the Committee may determine in its
discretion. The Company, by action of its Board of Directors upon the advice of
the Committee and subject to stockholder approval, may increase the number of
shares reserved under the Plan.

4.2      Offer Date.
         ----------

                  The Offer Date shall be the first Trading Day of every month
and the Offer Period will last for the duration of that calendar month, ending
on the last Trading Day of that month (the "Offering Termination Date"). Upon
the Offer Date, the Company will issue to each Participant, an option to
purchase, based upon the amount of the Employee's Base Pay to be reduced during
the Offer Period, a number of shares of Common Stock (the "Offering") as
determined and limited by Section 6.1.

                         ARTICLE V -- PAYROLL DEDUCTIONS
                         -------------------------------

5.1      Amount of Payroll Deduction.

                  At the time a Participant files his authorization for payroll
deductions, he shall elect to have deductions made from his Base Pay on each
payday during the time he is a Participant at the rate of 1, 2, 3, 4, 5, 6, 7 or
8% of his Base Pay paid during an Offer Period, except that there shall be a
minimum authorization of $200 per calendar quarter.





                                                                               6

5.2      Participant's Account.

                  All payroll deductions made for a Participant shall be
credited to his Payroll Deduction Account pending the purchase of Common Stock
in accordance with the Plan. The Participant's Payroll Deduction Account will
consist of a bookkeeping entry in the Company's financial records. A Participant
may not make any separate cash payment into such Payroll Deduction Account
except when on leave of absence and then only as provided in Section 5.4.

5.3      Changes in Payroll Deductions.

                  A Participant may discontinue his participation in the Plan as
described in Article VIII, but no other change can be made with regard to an
Offer Period and, specifically, a Participant may not alter the amount of his
payroll deductions for that Offer Period. Except as provided in Article VIII, a
Participant may modify or revoke an authorization for payroll deductions only
with respect to future Offer Periods.

5.4      Leave of Absence.
         ----------------

                  If a Participant goes on an approved leave of absence, during
the 90-day period described in Section 3.2, such Participant shall have the
right to elect:

                  (a) to withdraw the balance in his or her Payroll Deduction
Account pursuant to Section 8.1;

                  (b) to discontinue contributions to the Plan but remain a
Participant in the Plan; or

                  (c) to remain a Participant in the Plan during such leave of
absence, authorizing deductions to be made from payments by the Company to the
Participant during such leave of absence and undertaking to make cash payments
to the Company at the end of each payroll period to the extent that amounts
payable by the Company to such Participant are insufficient to meet such
Participant's authorized payroll deductions. Any payment made to the Company
under this section will be reflected as a credit to the Participant's Payroll
Deduction Account in accordance with Section 5.2.

                        ARTICLE VI -- GRANTING OF OPTION
                        --------------------------------

6.1      Number of Option Shares.

                  On each Offer Date, participating Employees shall be deemed to
have been granted options to purchase a number of shares of Common Stock of the
Company equal to the number of shares determined by dividing the amount of the
employee's payroll deductions authorized to be made through the end of the Offer
Period plus any carryovers, by the Option Value of the Common Stock of the
Company. The Option Value for the Offer Period shall be the Option Percentage,
multiplied by the lesser of the closing price of a share of Common Stock on the
New York Stock Exchange (or such




                                                                               7

other exchange on which the Company's Common Stock shall be principally traded)
on the first Trading Day of the Offer Period, or the closing price of a share of
Common Stock on the New York Stock Exchange (or such other exchange on which the
Company's Common Stock shall be principally traded) on the Offering Termination
Date.

                  The Option Percentage shall be eighty-five percent (85%) upon
the Effective Date of the Plan. The Committee, in its discretion, may amend the
Option Percentage to any percentage between 85% and 100% from time to time as is
deemed appropriate.

6.2      Option Price.
         ------------

                  The option price of Common Stock purchased with respect to an
Offering shall be the lesser of:

                 (a) the Option Percentage multiplied by the closing price of
the Common Stock on the Offer Date; or

                 (b) the Option Percentage multiplied by the closing price of
the Common Stock on the Offering Termination Date.

6.3      Common Stock Valuation.

                  If the Common Stock of the Company is not traded on a public
market on any of the aforesaid dates for which closing prices of the Common
Stock are to be determined, such closing price shall be deemed to be the fair
market value of the Common Stock on that date, as determined by the Committee.

6.4      Maximum Number of Shares per Offer Period.

                  In no event may more than 1,000 shares of Common Stock be
purchased by any one Participant in any one Offer Period.

                        ARTICLE VII -- EXERCISE OF OPTION
                        ---------------------------------

7.1      Automatic Exercise.
         ------------------

                  Unless a Participant gives written notice to the Plan
Administrator as hereinafter provided, his option to purchase Common Stock with
payroll deductions credited to his Payroll Deduction Account will be deemed to
have been exercised automatically on the Offering Termination Date (as defined
in Section 4.2) applicable to such offering, for the purchase of the number of
whole and fractional shares of Common Stock which the accumulated payroll
deductions and any carryovers in his Payroll Deduction Account at that time will
purchase at the applicable option price (but not in excess of the number of
shares for which options have been granted to the Employee pursuant to Article
VI). Any amount credited to a Participant's Payroll Deduction Account which is
not applied to purchase shares of Common Stock in an Offering





                                                                               8

pursuant to this Section shall, subject to the terms of the Plan, be used to
purchase shares of Common Stock in the next succeeding Offering.

7.2      Fractional Shares.
         -----------------

                  Fractional shares (computed to 4 decimal places) may be
credited to a Participant's Common Stock Account under the Plan but will not be
distributed to the Participant. If a Participant receives a withdrawal of, or
sells from his Common Stock Account, all whole shares credited to his Common
Stock Account, he shall also receive a cash distribution representing the value
(determined as of the withdrawal (or sale) date) of any fractional share
credited to his Common Stock Account and such fractional share shall cease to be
credited to such account.

7.3      Transfer of Option.
         ------------------

                  During a Participant's lifetime, options held by such
Participant shall be exercisable only by that Participant.

7.4      Stock Held by Custodian.

                  As promptly as practicable after the Offering Termination Date
of each Offering, the Company will deliver to the Custodian certificates for the
shares of Common Stock purchased on account of such Offering.

7.5      Restriction on Sale.

                  Shares of Common Stock purchased pursuant on an Offering
Termination Date shall not be transferable by a Participant for a period of six
months immediately following such Offering Termination Date.

                           ARTICLE VIII -- WITHDRAWAL
                           --------------------------

8.1      In General.
         ----------

                  (a) Withdrawal of Payroll Deductions. By written notice to the
                      --------------------------------
Plan Administrator at any time prior to two days prior to the Offering
Termination Date applicable to any Offering, a Participant may elect to withdraw
all (but not less than all) of the amount then credited to his Payroll Deduction
Account. Payment of the amount credited to his Payroll Deduction Account will be
made to him in cash promptly after receipt of his notice of withdrawal, and no
further payroll deductions will be made from his pay unless such Participant
again elects to participate, in the Plan (subject to Section 8.2) in accordance
with Section 3.4. The Committee may, at its option, treat any attempt to borrow
by an Employee on the security of his accumulated payroll deductions as an
election to withdraw such payroll deductions.

                      (b) Withdrawal of Common Stock. Subject to Section 7.5, by
                          --------------------------
written notice to the Custodian, a Participant may elect to receive a
distribution of some or all of the shares of Common Stock credited to his Common
Stock Account. Certificates






                                                                               9

representing such whole shares of Common Stock (and cash representing any
fractional share) shall be delivered to the Participant as soon as reasonably
practicable following such Participant's election. The Custodian may charge
Participants a reasonable fee (as agreed to by the Committee) for the delivery
of share certificates in accordance with this Section 8.1.

                  (c) Sale of Common Stock. By written notice to the Custodian,
                      --------------------
a Participant may direct the Custodian to sell some or all of the whole shares
of Common Stock credited to his Common Stock Account. The proceeds of any such
sale shall be delivered to the Participant as soon as reasonably practicable
following such sale. The Custodian may charge Participants a reasonable fee (but
not more than the standard brokerage fee charged to individuals by the Custodian
in the ordinary course) for executing any such sale.

8.2      Effect of Withdrawals and Sales on Subsequent Participation.

                  If a Participant withdraws shares of Common Stock from his
Common Stock Account or directs the Custodian to sell any shares of Common Stock
credited to his Common Stock Account, he will be deemed to have elected a
withdrawal of all amounts credited to his Payroll Deduction Account, he will not
be eligible to purchase any shares on the Offering Termination Date coincident
or next following such election to withdraw or sell, and he will not be eligible
to elect to participate in any Offering beginning within three months after the
date of such election to withdraw or sell. If a Participant withdraws any amount
credited to his Payroll Deduction Account, he will not be eligible to purchase
any shares on the Offering Termination Date coincident or next following such
election to withdraw or to elect to participate in any Offering beginning within
three months after the date of his election to withdraw. It shall be the express
responsibility of the Plan Administrator, and not the Custodian, to ensure
compliance with the provisions of this Section 8.2 of the Plan.

8.3      Termination of Employment.

                  (a) Payroll Deduction Account. Except as provided in Section
                      -------------------------
8.4, upon termination of the Participant's employment with the Company and all
Affiliated Entities for any reason, including retirement, the amount credited to
his Payroll Deduction Account will be deducted from his Payroll Deduction
Account and paid to him, or, in the case of his death, to the person or persons
entitled thereto under Section 12.1 and the option granted to him for such Offer
Period shall automatically terminate.

                  (b) Common Stock Account. Upon termination of the
                      --------------------
Participant's employment with the Company and all Affiliated Entities for any
reason, including retirement, the number of whole shares credited to his Common
Stock shall continue to be credited to his Common Stock Account until the
Participant directs the Custodian to sell or distribute such shares.

8.4      Termination of Employment Due to Death.






                                                                              10

                  Upon termination of the Participant's employment on account of
his death, his beneficiary (as defined in Section 12.1) shall have the right to
elect, by written notice given to the Plan Administrator prior to two days
before the Offering Termination Date, either:

                  (a) to withdraw all of the payroll deductions credited to the
Participant's Payroll Deduction Account under the Plan, in which case the
Participant's option shall automatically expire; or

                  (b) to exercise the Participant's option for the purchase of
stock on the Offering Termination Date next following the date of the
Participant's death for the purchase of the number of shares of stock which may
be purchased with the amount credited to the Participant's Payroll Deduction
Account at the date of the Participant's death (but not in excess of the number
of shares for which options have been granted to the Employee pursuant to
Article VI), and any excess credited to such Payroll Deduction Account will be
paid to said beneficiary, without interest.

                  In the event that no such written notice of election shall be
timely received by the Plan Administrator, the beneficiary shall automatically
be deemed to have elected, pursuant to paragraph (b), to exercise the
Participant's option.

                        ARTICLE IX -- INTEREST; DIVIDENDS
                        ---------------------------------

9.1      Payment of Interest.

                  No interest will be paid on any amounts deducted from a
Participant's pay or credited to his Payroll Deduction Account.

9.2      Dividends.
         ---------

                  All cash dividends paid with respect to shares of Common Stock
held in a participant's Common Stock Account shall be invested automatically in
shares of Common Stock purchased at one-hundred percent (100%) of fair market
value promptly following the receipt by the Custodian of such dividends. All
non-cash distributions paid on Common Stock held in a Participant's Common Stock
Account shall be paid to the Participant as soon as practicable following
receipt thereof by the Custodian.

                               ARTICLE X -- STOCK
                               ------------------

10.1     Maximum Shares.
         --------------

                  If the total number of shares of Common Stock for which
options are exercised on any Offering Termination Date in accordance with
Article VI exceeds the maximum number of authorized shares remaining for
purchase under Section 4.1, the Committee shall make a pro rata allocation
(based on the amounts deducted from pay) of the shares of Common Stock available
for delivery and distribution in as nearly a uniform manner as shall be
practicable and as it shall determine to be equitable, and the balance



                                                                              11

                  credited to the Payroll Deduction Account of each Participant
under the Plan shall be paid to him as promptly as possible.

10.2     Participant's Interest in Option Stock.

                  The Participant will have no interest in any shares of stock
covered by his option until such option has been exercised and shares of Common
Stock have been credited to the Participant's Common Stock Account.

10.3     Registration of Stock.

                  Common Stock purchased under the Plan shall be held by the
Custodian, as such, until distributed from Participants' Common Stock Accounts.
Shares of Common Stock to be delivered to a Participant under the Plan will be
registered in the name of the Participant, or, if the Participant so directs by
written notice to the Custodian, in the names of the Participant and one such
other person as may be designated by the Participant, as joint tenants with
rights of survivorship, to the extent permitted by applicable law.

10.4     Restrictions on Exercise.

                  The Board of Directors may, in its discretion, require as
conditions to the exercise of any option that the shares of Common Stock
reserved for issuance upon the exercise of the option shall have been duly
listed, upon official notice of issuance, upon a stock exchange, and that
either:

                  (a) a Registration Statement under the Securities Act of 1933,
as amended, with respect to said shares shall be effective; or

                  (b) the Participant shall have represented at the time of
purchase, in form and substance satisfactory to the Company, that it is his
intention to purchase the shares for investment and not for resale or
distribution.


                          ARTICLE XI -- ADMINISTRATION
                          ----------------------------

11.1     Appointment of Committee.

                  The Board of Directors shall appoint a committee of two or
more directors (the "Committee") to administer the Plan. No member of the
Committee shall be an Employee eligible to purchase Common Stock under the Plan.

11.2     Authority of Committee.

                  Subject to the express provisions of the Plan, the Committee
shall have plenary authority in its discretion to appoint, remove and replace
the Custodian, to interpret and construe any and all provisions of the Plan, to
adopt rules and regulations for administering the Plan, and to make all other
determinations deemed necessary or




                                                                              12

advisable for administering the Plan. The Committee's determination on the
foregoing matters shall be conclusive.

11.3     Rules Governing the Administration of the Committee.

                  The Board of Directors may from time to time appoint members
of the Committee in substitution for or in addition to members previously
appointed and may fill vacancies, however caused, in the Committee. The
Committee may select one of its members as its Chairman and shall hold its
meetings at such times and places as it shall deem advisable and may hold
telephonic meetings. A majority of its members shall constitute a quorum. All
determinations of the Committee shall be made by a majority of its members. The
Committee may correct any defect or omission or reconcile any inconsistency in
the Plan, in the manner and to the extent it shall deem desirable and in
accordance with applicable law. Any decision or determination reduced to writing
and signed by all of the members of the Committee shall be as fully effective as
if it had been made by a majority vote at a meeting duly called and held. The
Committee may appoint a secretary and shall make such rules and regulations for
the conduct of its business as it shall deem advisable.

                          ARTICLE XII -- MISCELLANEOUS
                          ----------------------------

12.1     Designation of Beneficiary.

                  A Participant may file a written designation of one or more
beneficiaries who is to receive any shares of Common Stock issuable and/or cash
payable after the Participant's death. Such designation of beneficiary may be
changed by the Participant at any time by written notice delivered prior to the
Participant's death to the Plan Administrator (or his delegee). Upon the death
of a Participant, if the Custodian has received a valid designation of
beneficiary and receives sufficient proof of such beneficiary's identity, the
Custodian shall deliver such shares of Common Stock and/or cash as are credited
to the Participants' Common Stock Account and/or Payroll Deduction Account to
such beneficiary. In the event of the death of a Participant and in the absence
of a living, validly designated beneficiary, the Custodian shall deliver such
shares of Common Stock and/or cash to the executor or administrator of the
estate of the Participant, or if no such executor or administrator has been
appointed (to the knowledge of the Custodian), the Committee, in its discretion,
may cause the Custodian to deliver such shares of Common Stock and/or cash to
the spouse or to any one or more dependents of the Participant as the Committee
may designate. No beneficiary shall, prior to the death of the Participant by
whom he has been designated, acquire any interest in any shares of Common Stock
or cash credited to the Participant's Common Stock Account or Payroll Deduction
Account under the Plan.

12.2     Transferability.
         ---------------

                  Neither payroll deductions credited to a Participant's Payroll
Deduction Account nor Common Stock credited to a Participant's Common Stock
Account, nor any rights with regard to the exercise of an option or to receive
shares of Common Stock




                                                                              13

under the Plan may be assigned, transferred, pledged, or otherwise disposed of
in any way by the Participant other than by will or the laws of descent and
distribution. Any such attempted assignment, transfer, pledge or other
disposition shall be without effect, except that the Plan Administrator may
treat such act as an election to withdraw such cash or shares of Common Stock in
accordance with Section 8.1.

12.3     Use of Funds.
         ------------

                  All payroll deductions received or held by the Company under
this Plan may be used by the Company for any corporate purpose and the Company
shall not be obligated to segregate such payroll deductions.

12.4     Adjustment Upon Changes in Capitalization.

                  (a) If, while any options are outstanding, the outstanding
shares of Common Stock of the Company have increased, decreased, changed into,
or been exchanged for a different number or kind of shares or securities of the
Company without the receipt of consideration through reorganization, merger,
recapitalization, reclassification, stock split, reverse stock split or similar
transaction, appropriate and proportionate adjustments may be made by the
Committee in the number and/or kind of shares which are subject to purchase
under outstanding options and on the option exercise price applicable to such
outstanding options. In addition, in any such event, the number and/or kind of
shares which may be offered in the Offerings described in Article IV hereof
shall also be proportionately adjusted. No adjustments shall be made for stock
dividends. For the purposes of this Paragraph, any distribution of shares to
shareholders in an amount aggregating 20% or more of the outstanding shares
shall be deemed a stock split and any distributions of shares aggregating less
than 20% of the outstanding shares shall be deemed a stock dividend.

                  (b) Upon the dissolution or liquidation of the Company, or
upon a reorganization, merger or consolidation of the Company with one or more
corporations as a result of which the Company is not the surviving corporation,
or upon a sale of substantially all of the property or stock of the Company to
another corporation, the holder of each option then outstanding under the Plan
will thereafter be entitled to receive at the next Offering Termination Date
upon the exercise of such option for each share as to which such option shall be
exercised, as nearly as reasonably may be determined, the cash, securities
and/or property which a holder of one share of the Common Stock was entitled to
receive upon and at the time of such transaction. The Board of Directors shall
take such steps in connection with such transactions as the Board shall deem
necessary to assure that the provisions of this Section 12.4 shall thereafter be
applicable, as nearly as reasonably may be determined, in relation to the said
cash, securities and/or property as to which such holder of such option might
thereafter be entitled to receive.

12.5     Amendment and Termination.

                  The Board of Directors shall have complete power and authority
to terminate or amend the Plan; provided, however, that the Board of Directors
shall not,




                                                                              14

without the approval of the stockholders of the Corporation (i) increase the
maximum number of shares which may be issued under any Offering; or (ii) amend
the requirements as to the class of employees eligible to purchase stock under
the Plan. No termination, modification, or amendment of the Plan may, without
the consent of an Employee then having an option, adversely affect any rights of
such Employee.

12.6     Effective Date.
         --------------

                  The Plan shall become effective as of the first day after its
adoption and approval by the Company through its Board of Directors and
shareholders (the "Effective Date").

12.7     No Employment Rights.

                  The Plan does not, directly or indirectly, create in any
employee or class of employees any right with respect to continuation of
employment by the Company, and it shall not be deemed to interfere in any way
with the Company's right to terminate, or otherwise modify, an employee's
employment at any time.

12.8     Effect of Plan.
         --------------

                  The provisions of the Plan shall, in accordance with its
terms, be binding upon, and inure to the benefit of all Employees and all
beneficiaries of Employees participating in the Plan, including, without
limitation, each such Employee's estate and the executors, administrators or
trustees thereof, heirs and legatees.

12.9     Governing Law.
         -------------

                  The law of the State of Delaware will govern all matters
relating to this Plan except to the extent it is superseded by the laws of the
United States.

EX-10.14

                                                                   Exhibit 10.14


                         EXECUTIVE EMPLOYMENT AGREEMENT

EXECUTIVE EMPLOYMENT AGREEMENT, effective as of November 1, 2001 by and between
MERISTAR HOTELS & RESORTS, INC., a Delaware corporation (the "Company"),
MERISTAR MANAGEMENT COMPANY, LLC, a Delaware limited liability company (the
"LLC"), and ROBERT MORSE (the "Executive"), an individual residing at 8414 Holly
Leaf Dr., McLean, VA 22102.

             The Company and the LLC desire to employ the Executive in the
capacity of President - Hotels & Resorts 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 (3) years, commencing on November 1, 2001 (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 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 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, President - Hotels & Resorts 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 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
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, so long as such activity does not



                                                                               2

                      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 President - Hotels & Resorts 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 $425,000
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. 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 plans, or other insurance plans and benefits on
the same basis and subject to the same qualifications as other senior executive
officers. As a returning employee, you will be given full credit for your
previous service in determining length of service for employee benefits.



                                                                               3

                      (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. Such vacation time shall not be carried over
year to year, and shall not be paid out upon termination of employment, or upon
expiration of this Agreement.

                      (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 officers' liability insurance if, in the
good faith judgment of the Company or the LLC, it cannot be obtained at a
reasonable cost.



                                                                               4

             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.

                      (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



                                                                               5

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 will
immediately vest and such options, along with those previously vested, will
become exercisable for a period of one (1) year thereafter .

                      (d) Subject to Section 5(f) hereof, if the Agreement is
not renewed by the Company in accordance with Paragraph 1, the Company and the
LLC shall pay the Executive a lump sum equal to the product of (x) one (1) times
the sum of (A) the Executive's then annual base salary and (B) the amount of the
Executive's bonus for the preceding year. In addition, all of the Executive's
unvested stock options will immediately vest and such options, along with those
previously vested, will become exercisable for a period of one (1) year
thereafter, and the Company shall continue in effect the Executive's health
insurance benefits until the earlier of (x) one (1) year from the end of the
term or (y) the date on which the Executive obtains health insurance coverage
from a subsequent employer.

                      (e) Subject to Section 5(f) 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) one (1) times the sum of (A)
the Executive's then annual base salary and (B) the amount of the Executive's
bonus for the preceding year. In addition, all of the Executive's unvested stock
options will immediately vest and such options, along with those previously
vested, will become exercisable for a period of one (1) year thereafter, and the
Company shall continue in effect the Executive's health insurance benefits until
the earlier of (x) one (1) year from the end of the term or (y) the date on
which the Executive obtains health insurance coverage from a subsequent
employer.

                      (f) If, within eighteen (18) months following a Change in
Control, the Term is terminated by the Executive for Good Reason, or by the
Company without Cause, or if the Agreement is not renewed by the Company in
accordance with Paragraph 1, 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 5(e) hereof; provided, that the amount
                                                     --------
of the multiplier described in clause (e) of Section 5 hereof shall be increased
from one times to two times.

                      (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 5(g)(i)
     and the Executive fails to cure the conduct within thirty (30) days after
     receipt of such notice;



                                                                               6

                                (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 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; or

                          (iv)  a Change in Control;

provided, however, that the Executive shall not be deemed to have Good Reason
- --------  -------
pursuant to clauses (ii) and (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. Change of Control
will not be deemed "Good Reason", however,



                                                                               7

     if the Executive maintains the same title, job responsibilities and
     compensation following a Change of Control.

                  (i)      As used herein, the term "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 fifty (50%)
         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, transaction (including without limitation a "going private
         transaction"), 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

                  Notwithstanding the foregoing, a Change in Control shall not
     be deemed to occur pursuant to clause (i) above solely because fifty (50%)
     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.

                   (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 hisemployment 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




                                                                             8

employment shall be set-off or in any other way limit orreduce the obligations
of the Company under this Section 5.

                  (k) Notwithstanding the previous provisions, if payments made
pursuant to this Section 5 are considered "parachute payments" under Section
280G of the Internal Revenue Code of 1986, then the sum of such parachute
payments plus any other payments made by the Company to the Executive which are
considered parachute payments shall be limited to the greatest amount which may
be paid to the Executive under Section 280G without causing any loss of
deduction to the Company under such section; but only if, by reason of such
reduction, the net after tax benefit of Executive shall exceed the net after tax
benefit if such reduction were not made. "Net after tax benefit" for purposes of
this Agreement shall mean the sum of (i) the total amounts payable to Executive
under Section 5, plus (ii) all other payments and benefits which the Executive
receives or is then entitled to receive from the Company that would constitute a
"parachute payment" which the meaning of Section 280G of the Code, less (iii)
the amount of federal income taxes payable with respect to the foregoing shall
be paid to Executive (based upon the rate in effect for such years as set forth
in the Code at the time of termination of Executive's employment), less (iv) the
amount of excise taxes imposed with respect to the payments and benefits
described in (i) and (ii) above by Section 4999 of the Code.

                  6.  Confidential Information and Covenants.

                      (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, customer lists, client lists and client contact lists,
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




                                                                             9

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).

                          (c) The Executive agrees that during his employment
hereunder and for a period of twelve months thereafter he will not solicit,
raid, entice or induce any person that then is or at any time during the
twelve-month period prior to the end of the Term was an employee of a Company
Affiliate (other than a person whose employment with such Company Affiliate has
been terminated by such Company Affiliate), to become employed by any person,
firm or corporation.

                  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 6 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 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.




                                                                           10

                     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:

                          Robert Morse
                          8414 Holly Leaf Dr.
                          McLean, VA 22102

                          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.

                          (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




                                                                           11

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.

                            [SIGNATURE PAGE FOLLOWS]




                                                                        12

                  IN WITNESS WHEREOF, the parties hereto have executed this
Agreement effective as of the date first above written.

                                   EXECUTIVE:


                                   /s/  Robert Morse
                                   --------------------------

                                   COMPANY:

                                   MERISTAR HOTELS & RESORTS, INC.

                                   By:  /s/  Christopher L. Bennett
                                        --------------------------------
                                       Name:
                                       Title:


                                   LLC:

                                   MERISTAR MANAGEMENT COMPANY,
                                   LLC

                                   By: MeriStar Hotels & Resorts, Inc.,
                                       its general partner

                                       By: /s/  Christopher L. Bennett
                                           -----------------------------
                                           Name:
                                           Title:

EX-10.15

                                                                   Exhibit 10.15


                              EMPLOYMENT AGREEMENT

                   EMPLOYMENT AGREEMENT, made as of July 16, 2000, by and
between, MERISTAR MANAGEMENT COMPANY, L.L.C, (the `Employer"), and THOMAS
VINCENT (the "Executive").

                   Pursuant to a merger, MeriStar H&R Operating Company
("Company") is acquiring the business of BridgeStreet Accommodations, Inc.
("BridgeStreet") and will operate such business through a new division of the
Company handling corporate housing (the "Division");

                   The Executive is presently employed by BridgeStreet Canada,
Inc., an Ontario corporation and wholly-owned subsidiary of BridgeStreet,
pursuant to an Employment Agreement, dated January 1, 2000 (the "Existing
Agreement"); and

                   The Employer desires to employ the Executive as an executive
in the Division, 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 Employer hereby employs the
                        ----------------
Executive, and the Executive agrees to be employed by the Employer, upon the
terms and subject to the conditions set forth herein, for an initial term of
three (3) years (the "Term"), commencing on the date hereof (the "Commencement
Date").

2.                      Positions; Conduct.
                        ------------------

(a)                             The Executive will hold the title and office in
the Company of Executive Vice President. The Executive will also hold the title
of President within the Division and shall report to such person as shall be
directed, from time to time, by the Board of Directors of the Company (the
"Board"). The Executive shall be responsible for the expansion of the business
of the Company into additional cities, both in the United States and abroad, and
such other activities as the Board shall direct from time to time, 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 the Board shall reasonably request.

(b)                     During the Term, the Executive agrees to devote his full
business time and attention to the business and affairs of the Company and to
faithfully and diligently perform, to the best of his ability, all of his duties
and responsibilities hereunder.

(c)                     It is intended that the  Executive's  office and place
of rendering his services under this Agreement shall be in the principal
executive offices of the Company in Washington, D.C. and that Executive shall
relocate to such area as soon as practical. The

                                       1



Executive acknowledges that, due to the nature of his position, he may be
required to engage in substantial business travel. In connection with the
Executive's relocation from Ontario, Canada to Washington, D.C. the Company and
the Executive have agreed to the relocation reimbursements set forth on Schedule
A attached hereto.

3.                 Salary; Additional Compensation; Perquisites and Benefits.
                   ---------------------------------------------------------

(a)                During the Term, the Employer will pay the Executive a base
salary at an aggregate annual rate of not less than US $220,000 per annum,
subject to review by the Compensation Committee of the Board (the "Compensation
Committee") in January 1, 2001 and annually thereafter. Such salary shall be
paid in periodic installments in accordance with the Employer's standard
practice, but not less frequently than semi-monthly.

(b)                For each fiscal year during the Term, the Executive will be
eligible to participate in the bonus plan of Employer for executives at his
level as in effect from time to time with a maximum bonus potential of sixty-six
(66%) percent of base salary. 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, as described in the Annual
Corporate Cash Incentive Plan. For the calendar year 2000, Executive will
receive a pro-rated bonus for time worked during that year. The Employer may
also award Executive a bonus pursuant to a long-term compensation plan related
to the performance of the Division, and the structure of that plan will be
finalized by the President of MeriStar Hotels & Resorts, Inc. no later than
December 31, 2000.

(c)                During the Term, the Executive will participate in all
benefit plans from time to time adopted by the Employer for similar level
executives. Summary plan descriptions describing the benefit plans presently in
effect are available for review by the Executive.

(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. The Compensation Committee has granted to the Executive,
effective on the Commencement Date, options to purchase 40,000 shares of the
common stock of the MeriStar Hotels & Resorts, Inc. at an exercise price equal
to the fair market value at the time of grant. Such options shall vest as
follows:

                   First Anniversary of the Commencement Date     33-1/3%

                   vested Second Anniversary of the
                   Commencement Date                              66-2/3%

                   vested Third Anniversary of the
                   Commencement Date
                                                                     100% vested

Such options shall be exercisable, subject to vesting and continued service, for
ten (10) years

                                       2



from the date of grant and in all other respects shall be subject to the terms
and conditions of the Incentive Plan.

                The Company will reimburse the Executive, in accordance with
its 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.

(e)                     The Executive shall be entitled to twenty three (23)
paid-time-off days annually (not including U.S. holidays) to be credited and
taken in accordance with the Employer's policy from time to time in effect for
similar level executives.

4.                      Termination.
                        -----------

(a)                     The Term will terminate immediately upon the Executive's
death or, upon thirty (30) days' prior written notice by the Employer, 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 90 consecutive
days, or for more than 90 days, whether or not continuous, during any 365-day
period, due to physical or mental incapacity or impairment.

(b)                     The Term may be terminated by the Employer upon notice
to the Executive upon the occurrence of any event constituting "Cause" as
defined herein.
5.                      Severance.
                        ---------

(a)                     If the Term is terminated upon the Executive's death or
Disability, the Employer 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.

(b)                     If the Term is terminated by the Employer for Cause, the
Employer 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 Employer's Incentive Plan and held by the Executive at
termination, will expire ninety (90) days after the termination date.

(e)                     If the Term is terminated by the Employer without Cause
on other than by reason of the Executive's death or disability, the Employer
will continue to pay the Executive his then base salary for the lesser of twelve
(12) months or the remainder of the Term. In addition, the Executive will be
entitled to those stock options that have vested through the date of termination
or will vest within twelve (12) months following the date of termination.

                                       3



(d)                     If the Term is terminated by the Executive other than
because of death or
Disability, the Employer 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.

(e)                     As used herein, the term "Cause" means:

(i)                     the Executive's failure or refusal to perform or observe
any of his duties, responsibilities or obligations set forth in this Agreement
in a professional manner or the Executive's willful malfeasance or gross
negligence in connection therewith;

(ii)                    Any act of the Executive involving malfeasance,  fraud,
theft, misappropriation of funds, embezzlement or dishonesty affecting the
Employer;

(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;
or

(iv)                    the Executive's breach of any other specific provision
of this Agreement and, if such breach is curable, the failure to cure same
within thirty (30) days of written notice thereof.

6.                      Executive's Covenants.
                        ---------------------

(a)                     The Executive acknowledges that the Company and its
subsidiaries or affiliated ventures including, without limitation the
BridgeStreet companies (collectively, the "Employer Affiliates"), own and have
developed and compile, and will in the future own, develop and compile certain
Confidential Information and that prior hereto and during the course of his
rendering services hereunder Confidential Information has and 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, customer lists, client lists and client contact lists,
agreements and other forms of documents, expansion plans, budgets, projections,

                                       4



and salary, staffing and employment information.

(c)                     During the Term and for a period of twenty-four months
after the termination of his employment with the Employer, with or without
Cause, the Executive will not, directly or indirectly, as a principal, agent or
otherwise, engage or participate in, or as an employee, consultant or advisor
render services or advise with respect to any type of business or enterprise
that at any time during such period competes with the Company or any Company
Affiliate in the business of providing direct lodging and related services
including, without limitation, the providing of temporary and permanent lodging
accommodations and related services within fifty (50) miles of any geographic
area in which the Company or its affiliates conduct business or plan to conduct
business within six months after termination; provided, however, that nothing
herein contained shall restrict the Executive from making any investments of up
to five (5%) of the securities of any company or enterprise whose securities is
listed on a national securities exchange or actively traded in the
over-the-counter market, so long as such investment does not give the Executive
the right to control or influence the policy decisions of any such business or
enterprise.

(d)                     The Executive agrees that during his employment
hereunder and for a period of twenty-four months thereafter he will not solicit,
raid, entice or induce any person that then is or at any time during the
twelve-month period prior to the end of the Term was an employee of a Company
Affiliate (other than a person whose employment with such Company Affiliate has
been terminated by such Company Affiliate), to become employed by any person,
firm or corporation.

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 and 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 and
the Company Affiliates 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 or any Company Affiliate 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 6 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 panties hereto
regard such restrictions as reasonable and compatible with their respective
nights.

                                       5



8.                      Withholding Taxes. The parties agree that all payments
                        -----------------
to be made to the Executive by the Employer pursuant to the Agreement shall be
subject to all applicable withholding tax obligations of such Employer.

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:

                        Thomas Vincent
                        1434 Buena Vista Ave.
                        McLean, VA 22101

                        If to the Employer, to:

                        MeriStar Hotels & Resorts, Inc.
                        1010 Wisconsin Avenue, N.W.
                        Washington, D.C. 20007
                        Attention:  General Counsel
                        Fax No.: (202) 295-1026

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 Employer
hereunder will be binding upon and run in favor of their respective successors
and assigns.

(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 6 hereof, in which case the Employer shall be entitled to seek
injunctive relief from a court of competent jurisdiction without the requirement
to seek arbitration.

                                       6



(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)                     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 particular, the Executive hereby agrees,
for the benefit of the Company and of BridgeStreet Canada, Inc., that the term
of the Existing Agreement shall terminate on the Commencement Date.

                   IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.

                               EXECUTIVE:

                               /s/  Thomas Vincent

                               EMPLOYER:

                               MeriStar Management Company, L.L.C.



                                   By:  /s/  Christopher L. Bennett
                                        ---------------------------
                                        Christopher L. Bennett
                                        Vice President, Legal



                                       7



                                   SCHEDULE A

                            RELOCATION REIMBURSEMENTS

1. The Employer shall reimburse the Executive for the reasonable out-of-pocket
expenses, including but not limited to airfare, car rental, accommodation and
meals, as required and incurred by the Executive and his immediate family in up
to three trips from Ontario, Canada to Washington, D.C. for the purposes of
acquiring a new personal residence in the Washington, D.C. metropolitan area (a
"New Residence").

2. The Employer shall reimburse the Executive for the reasonable out-of-pocket
expenses, including but not limited to packing, transportation, pickup,
delivery, and unpacking incurred by the Executive in the relocation of his and
his immediate family's household goods and up to three personal vehicles from
Ontario, Canada to any New Residence purchased by the Executive.

3. The Employer shall reimburse the Executive for closing and other incidental
costs, including legal costs, loan application fees, loan origin fees,
commissions, transfer taxes, home inspection fees, escrow fees, closing costs
and other actual expenses in connection with the selling of their existing
residence in Canada and the purchase of a New Residence in an amount not to
exceed seven (7%) percent of the full purchase price of such New Residence;
provided, that no such reimbursement for "points" or other similar charges shall
exceed one (1%) percent of such purchase price.

4. The Employer shall reimburse the Executive for $20,000 of incidental expenses
incurred by the Executive and his immediate family in connection with relocation
to the Washington, D.C. metropolitan area.

5. The Employer shall provide the Executive and his immediate family with up to
ninety (90) days lodging in the Washington, D.C. area (which may be in a hotel
or corporate housing accommodations owned or managed by the Company or its
affiliates) pending the acquisition of a New Residence by the Executive.

6. If any of the above amounts reimbursed to the Executive by the Employer
constitutes taxable income to the Executive, such reimbursement shall be
"grossed-up" so as to be tax neutral to the Executive.

7. The Employer shall provide professional assistance, including any legal,
accounting or tax advice to the Executive in connection with the Executive's
preparation of his tax returns in the United States for the year 2000 and pay
for related fees regarding any tax or relocation assistance, plus fees
associated with obtaining a green card or landed immigrant status on behalf of
the Executive for employment by the Employer.

                                       8

EX-21

                                                                      Exhibit 21

                           SUBSIDIARIES OF THE COMPANY

                                                                 Jurisdiction of
                                                                  Incorporation
             Name                                                or Organization
             ----                                                ---------------

MeriStar H&R Operating Company, L.P.                              Delaware
MeriStar Management Company, L.L.C.                               Delaware
AGH Leasing, L.P.                                                 Delaware
CapStar BK Company, L.L.C.                                        Delaware
CapStar California Beverage Corporation                           California
CapStar Hallmark Company, L.L.C.                                  Missouri
CapStar HGI Company, L.L.C.                                       Delaware
CapStar KC Company II, L.L.C.                                     Delaware
CapStar Winston Company, L.L.C.                                   Delaware
CapStar Wyandotte II Company, L.L.C.                              Missouri
MeriStar AGH Company, L.L.C.                                      Delaware
MeriStar Palmas Corp.                                             Delaware
MeriStar Palmas L.P. Corp.                                        Delaware
MeriStar Palmas, L.P., S.en C., (S.E.)                            Puerto Rico
MeriStar Storrs Company, L.L.C.                                   Delaware
Twin Towers Leasing, L.P.                                         Florida
MeriStar Laundry, L.L.C.                                          Delaware
MeriStar Preston Center, L.L.C.                                   Delaware
CapStar St. Louis Company, L.L.C.                                 Delaware
CapStar Wyandotte Company, L.L.C.                                 Missouri
MIP GP, L.L.C.                                                    Delaware
MIP GP, Inc.                                                      Delaware
MeriStar Management (Vancouver), Ltd.                             Canada
MeriStar Vacations, L.L.C.                                        Delaware
MeriStar HGI, L.L.C.                                              Delaware
MeriStar Pink Shell, L.L.C.                                       Delaware
HAI Acquisition Corp.                                             Delaware
Corporate Lodgings, Inc.                                          Delaware
BridgeStreet California, Inc.                                     Delaware
BridgeStreet North Carolina, Inc.                                 Delaware
Temporary Housing Experts, Inc.                                   Delaware
Temporary Corporate Housing, Inc.                                 Delaware
BridgeStreet Canada, Inc.                                         Canada
BridgeStreet Colorado, Inc.                                       Delaware
BridgeStreet Raleigh, Inc.                                        North Carolina
BridgeStreet Accommodations, Inc.                                 United Kingdom
Haus Account, L.L.C.                                              Maryland
BridgeStreet Maryland, Inc.                                       Delaware
BridgeStreet Arizona, Inc.                                        Delaware
BridgeStreet Accommodations, Ltd.                                 United Kingdom
Apalachee Bay SAS                                                 France
MML Restaurant Associates Inc.                                    Delaware
Flagstone Hospitality Management, L.L.C.                          Delaware



BridgeStreet Nevada, Inc.                                         Delaware
BridgeStreet Texas, L.P.                                          Delaware
BridgeStreet London, Ltd.                                         United Kingdom
Loryt(1), Ltd.                                                    United Kingdom
BridgeStreet Wardrobe Place, Ltd.                                 United Kingdom
MeriStar Flagstone, L.L.C.                                        Delaware

EX-23

                                                                      Exhibit 23

                          INDEPENDENT AUDITORS' CONSENT
                          -----------------------------


The Board of Directors
MeriStar Hotels & Resorts, Inc.

We consent to incorporation by reference in the registration statement (No.
333-60545) on Form S-8 (for the Non-Employee Directors' Incentive Plan), the
registration statement (No. 333-60539) on Form S-8 (for the Incentive Plan), the
registration statement (No. 333-61731) on Form S-8 (for The Employee Stock
Purchase Plan), and the registration statement (No. 333-84531) on Form S-3 of
MeriStar Hotels & Resorts, Inc. of our report dated January 29, 2002, with
respect to the consolidated balance sheets of MeriStar Hotels & Resorts, Inc. as
of December 31, 2001 and 2000, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the years in the
three-year period ended December 31, 2001; which report appears in the December
31, 2001 annual report on Form 10-K of MeriStar Hotels & Resorts, Inc.

/s/ KPMG LLP

Washington, D.C.
March 5, 2002