MERISTAR HOTELS & RESORTS INC
EXHIBIT 10.3
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>6
<FILENAME>dex103.txt
<DESCRIPTION>EXHIBIT 10.3
<TEXT>
<PAGE>


                                                                    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:

<PAGE>



          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-

<PAGE>


               (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-

<PAGE>

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-

<PAGE>


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-

<PAGE>

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-

<PAGE>

               (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-

<PAGE>


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-

<PAGE>


                    (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-

<PAGE>


          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-

<PAGE>

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-

<PAGE>

               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-

<PAGE>

               (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-

<PAGE>


               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-

</TEXT>
</DOCUMENT>
