Chartwell Leisure Inc · DEF 14A · For 3/16/98

Filed On 2/9/98   ·   SEC File 0-24794   ·   Accession Number 940180-98-112

Definitive Proxy Solicitation Material   ·   Schedule 14A
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: DEF 14A     Definitive Proxy Statement                           118    792K 

Document Table of Contents

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SECURITIES AND EXCHANGE COMMISSION  
WASHINGTON, D.C. 20549  

SCHEDULE 14A INFORMATION  

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 
1934, AS AMENDED  

Filed by the Registrant [X]                                                     
Filed by a Party other than the Registrant [_]                                  
Check the appropriate box:                                                      
[_] Preliminary Proxy Statement                                                 
[_] Confidential, for Use of the Commission Only (as permitted by               
Rule 14a-6(e)(2))                                                   
[X] Definitive Proxy Statement                                                  
[_] Definitive Additional Materials                                             
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12         

CHARTWELL LEISURE INC.  
------------------------------------------------------------------------------- 
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)  

------------------------------------------------------------------------------- 
(NAME OF PERSON(S) FILING PROXY STATEMENT IF OTHER THAN THE REGISTRANT) 

Payment of Filing Fee (Check the appropriate box):                              
[_] No fee required                                                             
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.    

1) Title of each class of securities to which transaction applies:          
Common Stock, $.01 par value, of Chartwell Leisure Inc. ("Chartwell 
Common Stock")                                                      

2) Aggregate number of securities to which transaction applies:             
15,734,136 shares of Chartwell Common Stock                         

3) Per unit price or other underlying value of transaction computed         
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the 
filing fee is calculated and state how it was determined):            
$17.25                                                              

4) Proposed maximum aggregate value of transaction:                         
$271,413,846                                                        

Pursuant to Reg. (S) 240.0-11(c)(1) under the Exchange Act, a fee of
$54,306.92 has been paid herewith, which is equal to 1/50th of 1% of
$271,534,596 (the value to be transferred to security holders in the
transaction).                                                       

5) Total fee paid:                                                          
$54,306.92                                                          

[X] Fee paid previously with preliminary materials.                             
[_] Check box if any part of the fee is offset as provided by Exchange Act      
Rule 0-11-(a)(2) and identify the filing for which the offsetting fee was   
paid previously. Identify the previous filing by registration statement     
number, or the Form or Schedule and the date of its filing.                 

1) Amount Previously Paid: _________________________________________________

2) Form, Schedule or Registration Statement No.: ___________________________

3) Filing Party: ___________________________________________________________

4) Date Filed: _____________________________________________________________

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CHARTWELL LEISURE INC.  
10 ROCKEFELLER PLAZA, SUITE 1250  
NEW YORK, NEW YORK 10020  

                                                              February 9, 1998

Dear Stockholder:                                                               

You are cordially invited to attend a Special Meeting of Stockholders       
(together with any postponement or adjournment thereof, the "Special Meeting")  
of Chartwell Leisure Inc. (the "Company") to be held on Monday, March 16, 1998  
at 10:00 a.m., local time, at the offices of Battle Fowler LLP, 75 East 55th    
Street, New York, New York. A Notice of the Special Meeting, a Proxy Statement  
containing information about the matters to be acted upon at the Special        
Meeting and a proxy card are enclosed.                                          

At the Special Meeting, you will be asked to consider and vote upon a       
proposal to approve and adopt the Agreement and Plan of Merger, dated as of     
November 13, 1997, as amended (the "Merger Agreement"), by and between the      
Company, Whitehall Street Real Estate Limited Partnership IX ("Parent"), and    
CLI Properties Acquisition Corp., currently a subsidiary of Parent ("Sub"),     
pursuant to which, among other things, Sub will merge with and into the         
Company (the "Merger"). The surviving corporation after the Merger will be a    
subsidiary of Parent. Pursuant to the Merger Agreement, each outstanding share  
of common stock, par value $.01 per share, of the Company (the "Shares"),       
other than Shares as to which dissenters' rights of appraisal have been duly    
asserted and perfected under Delaware law and Shares owned by the Company or    
by Parent, Sub or any other subsidiary of Parent (which will be canceled),      
will be converted into the right to receive $17.25 per Share in cash, without   
interest. The accompanying Proxy Statement provides a detailed description of   
the proposed Merger, and a copy of the Merger Agreement is attached as Annex A  
thereto. You are urged to read this material in its entirety and consider it    
carefully.                                                                      

The Board of Directors has fixed the close of business on February 4, 1998  
as the record date for determining the holders of Shares entitled to notice     
of, and to vote at, the Special Meeting (the "Record Date"). Only holders of    
record of Shares at the close of business on the Record Date are entitled to    
notice of, and to vote at, the Special Meeting.                                 

THE BOARD OF DIRECTORS UNANIMOUSLY HAS DETERMINED THAT THE MERGER IS FAIR TO
AND IN THE BEST INTERESTS OF STOCKHOLDERS, HAS APPROVED THE MERGER AGREEMENT    
AND RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE MERGER   
AGREEMENT. In determining to approve and recommend adoption of the Merger       
Agreement, the Board of Directors carefully reviewed and considered the terms   
and conditions of the proposed Merger, as well as a number of other factors.    
In addition, the Board of Directors has received the opinions of Lehman         
Brothers and Chase Securities Inc. as to the fairness, from a financial point   
of view, of the consideration to be received by the holders of Shares pursuant  
to the Merger. The full text of each of the opinions of Lehman Brothers and     
Chase Securities Inc., each of which is dated November 13, 1997, and which      
sets forth the assumptions made, matters considered and limits on review        
undertaken, is attached as Annex B and Annex C, respectively, to the            
accompanying Proxy Statement.                                                   

Approval and adoption of the Merger Agreement requires the affirmative vote 
of the holders of a majority of the outstanding Shares entitled to vote         
thereon.                                                                        

I URGE YOU TO FILL IN, DATE AND SIGN THE ENCLOSED PROXY CARD AND PROMPTLY   
RETURN IT IN THE ENCLOSED ENVELOPE SO THAT AS MANY SHARES AS POSSIBLE MAY BE    
REPRESENTED AT THE SPECIAL MEETING. NO POSTAGE IS NEEDED IF THE PROXY CARD IS   
MAILED IN THE UNITED STATES. PLEASE DO NOT SEND ANY STOCK CERTIFICATES WITH     
THE ENCLOSED PROXY CARD.                                                        

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If you plan to attend the Special Meeting, please check the appropriate box 
on your proxy card. You may attend the Special Meeting whether or not you have  
previously returned your proxy card.                                            

              Sincerely,

                         /s/ RICHARD L. FISHER

                     Richard L. Fisher
                                      Chairman of the Board of Directors
                               and Chief Executive Officer

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CHARTWELL LEISURE INC.  
10 ROCKEFELLER PLAZA, SUITE 1250  
NEW YORK, NEW YORK 10020  

----------------  

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS 
MONDAY, MARCH 16, 1998  

----------------  

To: The Stockholders of Chartwell Leisure Inc.                                  

Notice is Hereby Given that a special meeting of stockholders of Chartwell  
Leisure Inc. (the "Company") will be held on Monday, March 16, 1998 at 10:00    
a.m. local time, at the offices of Battle Fowler LLP, 75 East 55th Street, New  
York, New York (the "Special Meeting"), for the following purposes:             

1. To consider and vote upon a proposal to approve and adopt the        
Agreement and Plan of Merger, dated as of November 13, 1997, as amended     
(the "Merger Agreement"), by and between the Company, Whitehall Street Real 
Estate Limited Partnership IX, a Delaware limited partnership ("Parent"),   
and CLI Properties Acquisition Corp., a Delaware corporation and currently  
a subsidiary of Parent ("Sub"), pursuant to which:                          

a. Sub will be merged with and into the Company (the "Merger"); the 
Company will be the surviving corporation in the Merger and will be a   
subsidiary of Parent; and                                               

b. At the effective time of the Merger (the "Effective Time"), each 
outstanding share of common stock, $.01 par value per share, of the     
Company (the "Shares"), other than Shares as to which dissenters'       
rights of appraisal have been duly asserted and perfected under the     
Delaware General Corporation Law (the "DGCL") and Shares owned by the   
Company or by Parent, Sub or any other subsidiary of Parent (which will 
be canceled), will be converted into the right to receive $17.25 per    
Share in cash, without interest.                                        

2. To transact such other business as may properly come before the      
Special Meeting or any adjournment or postponement thereof.                 

Additional information relating to these matters is set forth in the        
accompanying Proxy Statement which should be read carefully and in its          
entirety.                                                                       

THE BOARD OF DIRECTORS UNANIMOUSLY HAS DETERMINED THAT THE MERGER IS FAIR TO
AND IN THE BEST INTERESTS OF STOCKHOLDERS, HAS APPROVED THE MERGER AGREEMENT    
AND RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE MERGER   
AGREEMENT.                                                                      

If the Company's stockholders approve and adopt the Merger Agreement at the 
Special Meeting and the Merger is consummated, from and after the Effective     
Time and until their successors are duly elected or appointed and qualified in  
accordance with applicable law, the directors and officers of Sub will become   
the directors and officers of the Company, as the surviving corporation in the  
Merger.                                                                         

Only holders of record of Shares at the close of business on February 4,    
1998 (the "Record Date") are entitled to notice of and to vote at the Special   
Meeting or any adjournment or postponement thereof.                             

The enclosed proxy is solicited by the Board of Directors of the Company.   
Reference is made to the attached Proxy Statement for further information with  
respect to the business to be transacted at the Special Meeting. You are        
cordially invited to attend the Special Meeting in person. THE BOARD OF         
DIRECTORS URGES YOU TO DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD PROMPTLY   
IN THE POSTAGE PAID                                                             

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ENVELOPE. A reply envelope is enclosed for your convenience. Please do not send 
any stock certificates with the enclosed proxy card. The return of the enclosed 
proxy will not affect your right to vote if you attend the Special Meeting.     

                                       By order of the Board of Directors,

                          /s/  Douglas H. Verner

                               DOUGLAS H. VERNER
                       Secretary

Dated: February 9, 1998                                                         

IF YOU HAVE ANY QUESTIONS, OR NEED ASSISTANCE IN VOTING YOUR SHARES, PLEASE 
CALL CHASEMELLON SHAREHOLDER SERVICES, WHICH IS ASSISTING US, TOLL-FREE AT    
1-888-224-2745.       

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS 

Information contained in this Proxy Statement contains "forward-looking     
statements" relating to, without limitation, future economic performance,       
plans and objectives of management for future operations and projections of     
revenue and other financial items, which can be identified by the use of        
forward-looking terminology such as "may," "will," "should," "expect,"          
"anticipate," "estimate" or "continue" or the negative thereof or other         
variations thereon or comparable terminology. The cautionary statements set     
forth in this Proxy Statement identify important factors with respect to such   
forward-looking statements, including certain risks and uncertainties that      
could cause actual results to differ materially from those in such forward-     
looking statements.                                                             

Certain statements under the captions "SUMMARY" and "SPECIAL FACTORS--      
Financial Advisors; Fairness Opinion" and elsewhere in this Proxy Statement     
constitute "forward-looking statements." Such forward-looking statements        
involve known and unknown risks and uncertainties which may cause the actual    
results, performance and achievements of the Company, or industry results, to   
be materially different from any future results, performance or achievements    
expressed or implied by such forward-looking statements.                        

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CHARTWELL LEISURE INC.  
10 ROCKEFELLER PLAZA, SUITE 1250  
NEW YORK, NEW YORK 10020  

--------------- 

PROXY STATEMENT 

--------------- 

INTRODUCTION  

This Proxy Statement is being furnished to the stockholders of Chartwell    
Leisure Inc., a Delaware corporation (the "Company"), in connection with the    
solicitation of proxies by the Board of Directors of the Company (the "Board")  
from the holders of shares of the common stock, par value $.01 per share, of    
the Company (the "Shares") for use at a Special Meeting of Stockholders of the  
Company to be held on Monday, March 16, 1998, at 10:00 a.m. local time, at the  
offices of Battle Fowler LLP, 75 East 55th Street, New York, New York, and at   
any adjournment or postponement thereof (the "Special Meeting"). This Proxy     
Statement and the enclosed proxy card are first being mailed to holders of      
Shares on or about February 9, 1998.                                            

At the Special Meeting, holders of Shares on the Record Date (as defined    
below) will be asked to consider and vote upon a proposal to approve and adopt  
the Agreement and Plan of Merger, dated as of November 13, 1997, as amended     
(the "Merger Agreement"), by and between the Company, Whitehall Street Real     
Estate Limited Partnership IX, a Delaware limited partnership ("Parent"), and   
CLI Properties Acquisition Corp., a Delaware corporation and currently a        
subsidiary of Parent ("Sub"), pursuant to which, among other things, Sub will   
merge with and into the Company (the "Merger"). The Company will be the         
surviving corporation after the Merger (the "Surviving Corporation") and will   
be a subsidiary of Parent. Pursuant to the Merger Agreement, each outstanding   
Share, other than Shares as to which dissenters' rights of appraisal have been  
duly asserted and perfected under the Delaware General Corporation Law (the     
"DGCL") and shares held by the Company, Parent, Sub or any other subsidiary of  
Parent (which will be canceled), will be converted into the right to receive    
$17.25 in cash, without interest (the "Merger Consideration"). Accordingly,     
the total amount of Merger Consideration, together with the amounts to be paid  
to the holders of options to purchase Shares of the Company, to be paid by      
Parent and Sub in the Merger will be approximately $271 million in cash. As of  
February 5, 1998, the last trading day before the printing of this Proxy        
Statement, the closing per Share price of the Company was $16 15/16. As a       
result of the Merger, the Shares will no longer be publicly traded and Parent   
will become the sole stockholder of the Surviving Corporation. Following the    
Merger, persons who were stockholders of the Company immediately prior to the   
Merger will no longer have an opportunity to continue their interests in the    
Company as an ongoing corporation and therefore will not share in its future    
earnings and potential growth. See "STOCKHOLDERS' RIGHTS OF APPRAISAL" and      
"THE MERGER AGREEMENT--Merger Consideration; Conversion of Shares."             

Only holders of record of Shares at the close of business on February 4,    
1998, the record date for the Special Meeting (the "Record Date"), are          
entitled to notice of, and to vote at, the Special Meeting. At the close of     
business on the Record Date, 13,485,999 Shares were issued and outstanding,     
which constituted the only issued and outstanding class of voting securities    
of the Company.                                                                 

Consummation of the Merger is conditioned upon, among other things, approval
and adoption of the Merger Agreement by the affirmative vote of the holders of  
a majority of the issued and outstanding Shares entitled to vote thereon and    
the receipt of certain other approvals and consents. Two of the Company's       
principal stockholders, Chartwell Leisure Associates L.P. II ("CL Associates")  
and FSNL LLC ("FSNL"), which collectively beneficially own 44.74% of the        
outstanding Shares, are parties to an agreement with the Company which          
requires such stockholders to vote their Shares for and against approval and    
adoption of the Merger Agreement in the same proportion as the Shares held by   
the other stockholders of the Company voted for and against approval of the     
Merger. CL Associates is a limited partnership consisting of members of the     
Fisher Brothers family and a trust for the benefit of Gordon Getty and members  
of his family. Richard L. Fisher, Chairman and Chief Executive Officer of the   
Company, Martin L. Edelman, President and a director of the Company, and Marc   
E. Leland and Arnold Fisher, both of whom are directors of the Company, are     
beneficial owners of CL Associates. FSNL is a limited liability company owned   
principally by a trust for the benefit of Charles de Gunzberg. Guido Goldman,   
a director of the Company, is a Manager and beneficial owner of FSNL and a      
beneficiary of a trust that is a member of FSNL. See "SPECIAL FACTORS--         
Interests of Certain Persons in the Merger; Potential Conflicts of Interest."   
The Special Meeting may be postponed or adjourned from time to time until such  
conditions are satisfied. There can be no assurance that the conditions to the  
Merger will be satisfied or, where permissible, waived, or that the Merger      
will be consummated. See "THE MERGER AGREEMENT--Conditions to Consummation of   
the Merger" and "THE SPECIAL MEETING--Record Date, Voting Rights and Vote       
Required."                                                                      

--------------- 

THIS TRANSACTION HAS NOT BEEN  APPROVED OR DISAPPROVED BY THE SECURITIES AND  
EXCHANGE  COMMISSION NOR  HAS THE  COMMISSION PASSED  UPON THE  FAIRNESS  
OR MERITS  OF SUCH TRANSACTION NOR UPON THE ACCURACY OR  ADEQUACY OF  
THE INFORMATION  CONTAINED IN THIS DOCUMENT.  ANY REPRESENTATION  
TO THE CONTRARY IS UNLAWFUL.                                  

--------------- 

The date of this Proxy Statement is February 9, 1998. 

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AVAILABLE INFORMATION 

The Company is subject to the informational requirements of the Securities  
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance        
therewith files reports, proxy statements and other information with the        
Securities and Exchange Commission (the "Commission"). Copies of such reports,  
proxy statements and other information can be inspected and copied at the       
public reference facilities of the Commission at its principal office at        
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549,     
and at its regional offices at Citicorp Center, 500 West Madison Street, Suite  
1400, Chicago, Illinois 60661-2511, and at 7 World Trade Center, Suite 1300,    
New York, New York 10048. Any interested party may obtain copies of such        
material at prescribed rates from the Public Reference Section of the           
Commission at its principal office at Judiciary Plaza, 450 Fifth Street, N.W.,  
Room 1024, Washington, D.C. 20549. The Company files information                
electronically with the Commission, and the Commission maintains a Web Site     
that contains reports, proxy and information statements and other information   
regarding registrants (including the Company) that file electronically with     
the Commission. The address of the Commission's Web Site is                     
(http://www.sec.gov). Such reports, proxy statements and other information      
concerning the Company can also be inspected at the offices of the National     
Association of Securities Dealers, 1735 K Street, N.W., Washington, D.C.        
20006, which supervises the NASDAQ National Market on which the Shares are      
traded.                                                                         

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY        
REPRESENTATIONS OTHER THAN THOSE CONTAINED, OR INCORPORATED BY REFERENCE, IN    
THIS PROXY STATEMENT IN CONNECTION WITH THE SOLICITATION OF PROXIES MADE        
HEREBY, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS SHOULD NOT    
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OTHER PERSON.    
ALL INFORMATION CONTAINED IN THIS PROXY STATEMENT RELATING TO THE COMPANY HAS   
BEEN SUPPLIED BY THE COMPANY, AND ALL INFORMATION CONTAINED IN THIS PROXY       
STATEMENT RELATING TO PARENT AND SUB, EACH OF THEIR RESPECTIVE AFFILIATES AND   
THE PLANS FOR THE SURVIVING CORPORATION FOLLOWING THE MERGER HAS BEEN SUPPLIED  
BY PARENT. THE DELIVERY OF THIS PROXY STATEMENT SHALL NOT, UNDER ANY            
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE       
AFFAIRS OF THE COMPANY, PARENT OR SUB SINCE THE DATE HEREOF OR THAT THE         
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.            

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TABLE OF CONTENTS 

                                                                · Download Table

                                                                          PAGE
                                                                          ----
                                                                              
SUMMARY..................................................................   1 
  The Company............................................................   1 
  Parent and Sub.........................................................   1 
  Failure to Consummate the Merger.......................................   1 
  The Special Meeting....................................................   1 
  The Merger.............................................................   2 
  Interests of Certain Persons in the Merger; Potential Conflicts of          
   Interest..............................................................   4 
  Stockholders' Rights of Appraisal......................................   9 
  Market Prices and Dividends............................................   9 
  Selected Consolidated Financial Data...................................  10 
  Certain Company Projections............................................  13 
THE SPECIAL MEETING......................................................  15 
  Date, Time and Place; Purpose of the Special Meeting...................  15 
  Record Date, Voting Rights and Vote Required...........................  15 
  Proxies................................................................  16 
  Stockholders' Rights of Appraisal......................................  17 
SPECIAL FACTORS..........................................................  17 
  Background of the Merger...............................................  17 
  Recommendation of the Board; Fairness of the Merger....................  22 
  Financial Advisors; Fairness Opinions..................................  23 
  Purpose and Structure of the Merger....................................  30 
  Certain Effects of the Merger..........................................  30 
  Interests of Certain Persons in the Merger; Potential Conflicts of          
   Interest..............................................................  31 
  Indemnification of Directors and Officers..............................  38 
  Accounting Treatment of the Merger.....................................  38 
  Certain Federal Income Tax Consequences to Stockholders................  38 
SOURCE AND AMOUNT OF FUNDS...............................................  39 
STOCKHOLDERS' RIGHTS OF APPRAISAL........................................  39 
THE MERGER AGREEMENT.....................................................  43 
  Effective Time.........................................................  43 
  Merger Consideration; Conversion of Shares.............................  43 
  Stock Options..........................................................  43 
  Procedure for Payment..................................................  43 
  Dissenting Shares......................................................  45 
  Certain Representations and Warranties.................................  45 
  Conduct of Business Pending the Closing................................  46 
  No Solicitation of Proposals...........................................  47 
  Directors' and Officers' Insurance and Indemnification.................  48 
  Certain Other Covenants................................................  49 
  Conditions to Consummation of the Merger...............................  51 
  Termination............................................................  54 
REGULATORY MATTERS.......................................................  56 
  HSR Act................................................................  56 
  Canadian Acts..........................................................  56 
  Other Foreign Regulatory Matters.......................................  56 

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                                                                          PAGE
                                                                          ----
                                                                              
CERTAIN INFORMATION CONCERNING THE COMPANY...............................  56 
  The Company............................................................  56 
  Directors and Executive Officers.......................................  57 
  Certain Relationships and Related Transactions with Directors and           
   Officers..............................................................  59 
CERTAIN INFORMATION CONCERNING PARENT AND SUB............................  59 
FEES AND EXPENSES........................................................  59 
MARKET PRICES AND DIVIDENDS..............................................  60 
  Market Prices..........................................................  60 
  Dividends..............................................................  60 
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...........  60 
  Security Ownership of Certain Beneficial Owners........................  60 
OTHER BUSINESS...........................................................  63 
INDEPENDENT ACCOUNTANTS..................................................  63 
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING............................  63 
INCORPORATION BY REFERENCE...............................................  63 
ANNEX A--Agreement and Plan of Merger, as amended                             
ANNEX B--Opinion of Lehman Brothers                                           
ANNEX C--Opinion of Chase Securities Inc.                                     
ANNEX D--Section 262 of the DGCL                                              

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SUMMARY 

 The following is a summary of certain information contained elsewhere in this
Proxy Statement and is presented herein solely to furnish limited introductory  
information regarding the proposed Merger and the parties thereto. This Summary 
is not intended to be complete and is qualified in its entirety by the more     
detailed information contained, or incorporated by reference, in this Proxy     
Statement and the Annexes hereto, to which reference is made for a complete     
statement of the matters discussed below. Stockholders are urged to read this   
Proxy Statement, including the Annexes hereto, and the documents incorporated   
herein by reference, in their entirety and to consider them with care. Unless   
otherwise defined herein, capitalized terms used in this summary have the       
respective meanings ascribed to them elsewhere in the Proxy Statement.          

THE COMPANY                                                                     

Chartwell Leisure Inc., a Delaware corporation (the "Company"), is a hotel  
and motel owner, operator, developer and acquiror. The Company owns, directly   
or with joint venture partners, 123 hotel properties in both the full-service   
and limited-service segments, including approximately 10,900 guest rooms,       
located in 25 states and six Canadian provinces. In the full-service segment,   
the Company operates 29 hotels aggregating approximately 5,700 guest rooms. The 
Company's remaining 94 hotels, consisting of approximately 5,200 rooms, operate 
in the limited-service segment, principally under the Travelodge(R) brand. See  
"CERTAIN INFORMATION CONCERNING THE COMPANY."                                   

PARENT AND SUB                                                                  

Parent is a Delaware limited partnership that engages in the business of    
investing in debt and equity interests in real estate related assets and        
businesses. WH Advisors, L.L.C. IX, a Delaware limited liability company ("WH   
Advisors, L.L.C."), acts as the sole general partner of Parent, and Whitehall   
IX/X, Inc., a Delaware corporation, acts as the managing member of WH Advisors, 
L.L.C.  Parent, Sub, WH Advisors, L.L.C. and Whitehall IX/X, Inc. are all       
affiliates of The Goldman Sachs Group, L.P., a Delaware limited partnership     
("GS Group"). See "CERTAIN INFORMATION CONCERNING PARENT AND SUB." Sub, a       
Delaware corporation and currently a subsidiary of Parent, was incorporated on  
November 12, 1997 for the purpose of acquiring the Company and has not engaged  
in any business activity except in connection with the Merger. Parent intends   
to enter into arrangements with affiliates of Westmont Hospitality Group, Inc.  
(collectively, "Westmont") pursuant to which, among other things, Westmont      
would acquire a minority interest in the Company. If such arrangements are      
effected prior to the closing of the Merger, Westmont could acquire a direct    
interest in Sub. Westmont is a hotel investment and management group active in  
the United States, Canada and Europe which has a long-standing relationship     
with, and has engaged in a number of hotel acquisitions in cooperation with,    
members of the GS Group.                                                        

FAILURE TO CONSUMMATE THE MERGER                                                

In the event that the Merger does not occur, the Company intends to use its 
available cash, which totaled approximately $50 million as of December 31,      
1997, to pay down its bank debt and/or pursue the development of certain of its 
properties. In addition, the Company will also explore the possibility of       
selling individual properties or groups of properties, although, at this time,  
the Company has had no discussions with third parties concerning such sales. In 
certain instances, if the Merger Agreement is terminated, the Company will pay  
Parent certain fees. See "--The Merger--The Company's Right to Accept           
Alternative Transactions;" "THE MERGER AGREEMENT--Termination."                 

THE SPECIAL MEETING                                                             

 Date, Time and Place. The Special Meeting of stockholders of the Company will
be held on Monday, March 16, 1998 at 10:00 a.m., local time, at the offices of  
Battle Fowler LLP, 75 East 55th Street, New York, New York and at any           
adjournment or postponement thereof (the "Special Meeting").                    

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Purpose. At the Special Meeting, holders of common stock, par value $.01 per
share, of the Company (the "Shares") will be asked to consider and vote upon a  
proposal to approve and adopt the Merger Agreement, pursuant to which, among    
other things, Sub will merge with and into the Company. The Company will be the 
surviving corporation in the Merger (the "Surviving Corporation") and will be a 
subsidiary of Parent. See "THE SPECIAL MEETING--Date, Time and Place; Purpose   
of the Special Meeting."                                                        

Record Date; Stockholders Entitled to Vote. Only holders of record of Shares
issued and outstanding at the close of business on February 4, 1998 (the        
"Record Date"), are entitled to notice of, and to vote at, the Special Meeting. 
At the close of business on the Record Date, 13,485,999 Shares were issued and  
outstanding and were held by 124 holders of record, which constituted the only  
issued and outstanding class of voting securities of the Company. See "THE      
SPECIAL MEETING--Record Date, Voting Rights and Vote Required."                 

Quorum; Vote Required. The presence at the Special Meeting, either in person
or by proxy, of the holders of a majority of the Shares entitled to vote on the 
Merger Agreement will constitute a quorum at the Special Meeting. Approval and  
adoption of the Merger Agreement requires the affirmative vote of the holders   
of a majority of the outstanding Shares entitled to vote thereon. Two of the    
Company's principal stockholders, which collectively beneficially own 44.74% of 
the outstanding Shares, are parties to an agreement with the Company which      
requires such stockholders to vote their Shares for and against approval and    
adoption of the Merger Agreement in the same proportion as the Shares held by   
the other stockholders of the Company voted for and against approval of the     
Merger. See "SPECIAL FACTORS--Interests of Certain Persons in the Merger;       
Potential Conflicts of Interest" and "THE SPECIAL MEETING--Record Date, Voting  
Rights and Vote Required."                                                      

 Proxies. The enclosed proxy provides that each stockholder of the Company may
specify that his or her Shares be voted "for" or "against" approval and         
adoption of the Merger Agreement or that the proxy holder be directed to        
"abstain" from voting with respect thereto. If properly executed and returned   
in time for the Special Meeting, the enclosed proxy will be voted in accordance 
with the choice specified. If a properly executed proxy is returned, but no     
choice is specified, the Shares will be voted FOR approval and adoption of the  
Merger Agreement. Votes cast against the approval and adoption of the Merger    
Agreement will not be voted in favor of any adjournment of the Special Meeting  
for the purpose of additional solicitation of approval and adoption of the      
Merger Agreement.                                                               

Any stockholder who executes and returns a proxy may revoke it at any time  
before it is voted at the Special Meeting by (i) delivering to the Secretary of 
the Company at the Company's principal offices before the Special Meeting an    
instrument of revocation bearing a later date or time than the date or time of  
the proxy being revoked; (ii) submitting a duly executed proxy bearing a later  
date or time than the date or time of the proxy being revoked; or (iii) voting  
in person at the Special Meeting. A stockholder's attendance at the Special     
Meeting will not by itself revoke a proxy given by such stockholder. See "THE   
SPECIAL MEETING--Proxies."                                                      

THE MERGER                                                                      

General. Following approval and adoption of the Merger Agreement by the     
stockholders of the Company and the satisfaction or waiver of certain other     
conditions, Sub will merge with and into the Company, and the separate          
corporate existence of Sub will cease. As a result of the Merger, the Surviving 
Corporation will be a subsidiary of Parent. See "SPECIAL FACTORS--Certain       
Effects of the Merger."                                                         

As a result of the Merger, each outstanding Share, other than Shares as to  
which dissenters' rights of appraisal have been duly asserted and perfected     
under the Delaware General Corporation Law (the "DGCL") or Shares held by the   
Company or by Parent, Sub or any other subsidiary of Parent (which will be      
canceled), will be converted into the right to receive $17.25 in cash, without  
interest (the "Merger Consideration"), upon surrender of the certificate        
formerly representing such Share. As a result of the Merger, the Shares will no 
longer be publicly traded and Parent will become the sole stockholder of the    
Surviving Corporation. Following the Merger, persons who were stockholders of   
the Company immediately prior to the Merger will no longer have an opportunity  
to continue their interests in the Company as an ongoing corporation and,       
therefore, will not share in its future earnings and potential growth. See "THE 
MERGER AGREEMENT--Procedure for Payment."                                       

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Effective Time. The Merger will become effective when the Certificate of    
Merger is filed with the Secretary of State of the State of Delaware or at such 
later time as is specified in such Certificate (the "Effective Time"). It is    
currently anticipated that such filing will be made on or as promptly as        
practicable following the closing date under the Merger Agreement, which will   
take place only after the satisfaction or waiver of all of the conditions set   
forth in the Merger Agreement. Accordingly, there can be no assurance as to if  
or when the Merger will be consummated. See "THE MERGER AGREEMENT--Effective    
Time" and "THE MERGER AGREEMENT--Conditions to Consummation of the Merger."     

Exchange of Shares. As soon as reasonably practicable after the Effective   
Time, a paying agent selected by Parent ("Paying Agent") will mail to each      
record holder of a stock certificate that immediately prior to the Effective    
Time represented outstanding Shares, other than Shares as to which dissenters'  
rights of appraisal have been duly asserted and perfected under the DGCL (the   
"Certificates"), a form of letter of transmittal and instructions for use in    
effecting the surrender of Certificates for payment pursuant to the Merger.     
Stockholders should not surrender their Certificates together with their proxy  
cards for the Special Meeting. Upon surrender to the Paying Agent of a          
Certificate, together with such letter of transmittal, duly executed, and any   
other required documents, and upon acceptance thereof by the Paying Agent, the  
holder of such Certificate will be entitled to receive in exchange therefor     
cash in the amount equal to the product of the number of Shares represented by  
such Certificate multiplied by $17.25 less any withholding taxes and such       
Certificate will then be cancelled. No interest will be paid or accrued on the  
cash payable upon surrender of the Certificate. See "THE MERGER AGREEMENT--     
Merger Consideration; Conversion of Shares."                                    

The Company's Right to Accept Alternative Transactions. The Company has the 
right to terminate the Merger Agreement under certain circumstances if it has   
received a proposal for an Acquisition Transaction which the Board of Directors 
of the Company (the "Board") determines represents a more favorable financial   
alternative to the Company's stockholders than the Merger and that failure to   
accept such proposal would be reasonably expected to be a breach of, or would   
be inconsistent with, the Board's fiduciary duties under applicable law. An     
"Acquisition Transaction" means, generally, a transaction involving any of the  
following: (i) an acquisition of more than 10% of any class of equity           
securities of the Company; (ii) a merger, consolidation, share exchange,        
recapitalization, business combination or other similar transaction; (iii) a    
sale or other disposition of assets (other than immaterial assets) of the       
Company or any of its subsidiaries in a single transaction or series of related 
transactions; or (iv) a tender offer or exchange offer for 25 percent or more   
of the outstanding Shares of capital stock of the Company. Among other          
requirements, the Company is required to pay Parent a fee of $8,145,000 before  
the Company can terminate the Merger Agreement because of the receipt of such a 
proposal. See "THE MERGER AGREEMENT--Termination." If within one year following 
the date of such termination, any other Acquisition Transaction is consummated  
by the Company, then the Company will pay to Parent, simultaneously with the    
consummation of such other Acquisition Transaction, a fee equal to 3% of the    
aggregate amount of the consideration paid to the Company or its stockholders,  
as applicable, pursuant to such Acquisition Transaction.                        

Conditions to Consummation of the Merger. The obligations of the Company,   
Parent and Sub to consummate the Merger are subject to a number of conditions,  
including, among others, approval and adoption of the Merger Agreement by the   
affirmative vote of the holders of a majority of the outstanding Shares         
entitled to vote thereon. Two of the Company's principal stockholders, which    
collectively beneficially own 44.74% of the outstanding Shares, are parties to  
an agreement with the Company which requires such stockholders to vote their    
Shares for and against approval and adoption of the Merger Agreement in the     
same proportion as the number of Shares held by the other stockholders of the   
Company voted for and against approval and adoption of the Merger. See "SPECIAL 
FACTORS--Interests of Certain Persons in the Merger; Potential Conflicts of     
Interest" and "THE SPECIAL MEETING--Record Date, Voting Rights and Vote         
Required." For a more complete discussion of the conditions to the obligations  
of the Company, Parent and Sub to consummate the Merger, see "THE MERGER        
AGREEMENT--Conditions to Consummation of the Merger." There can be no assurance 
that the conditions to the Merger will be satisfied or, where permissible,      
waived, or that the Merger will be consummated.                                 

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 Background. For a description of the events leading to approval of the Merger
Agreement by the Board, see "SPECIAL FACTORS--Background of the Merger."        

Recommendation of the Board. On November 13, 1997, the Board, pursuant to   
action by written consent, unanimously authorized and approved the Merger       
Agreement and the transactions contemplated thereby, determined that the Merger 
is fair to and in the best interests of the stockholders of the Company and     
determined to recommend to the stockholders that they vote for approval and     
adoption of the Merger Agreement. See "SPECIAL FACTORS--Background of the       
Merger." For a discussion of the factors the Board considered in arriving at    
its determination that the Merger is fair to and in the best interests of the   
stockholders of the Company, see "SPECIAL FACTORS--Recommendation of the Board; 
Fairness of the Merger." THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR        
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.                                  

Opinion of Financial Advisors. The Company engaged Bear Stearns & Co. Inc.  
("Bear Stearns"), Lehman Brothers Inc. ("Lehman Brothers") and Chase Securities 
Inc. ("Chase") to act as its financial advisors to assist the Company in        
considering strategic alternatives with respect to the Company. The fee payable 
to Bear Stearns and Lehman Brothers upon consummation of the Merger will total  
approximately $1.36 million each. The fee payable to Chase upon consummation of 
the Merger will total approximately $679,000. At the November 11, 1997 meeting  
of the Board, each of Chase and Lehman Brothers delivered their oral opinion    
(which each subsequently confirmed in writing) as to the fairness, from a       
financial point of view, of the consideration to be received by the holders of  
Shares pursuant to the Merger. Lehman Brothers' analysis indicated ranges of    
imputed values of the Company from a low of $10.87 to a high of $24.23 per      
Share on a fully-diluted basis. Chase's analysis indicated ranges of imputed    
values of the Company from a low of $15.37 to a high of $20.49 per Share on a   
fully-diluted basis. The full text of the opinions of Lehman Brothers and       
Chase, which set forth the assumptions made, matters considered and limits on   
review undertaken, are attached hereto as Annex B and Annex C, respectively,    
and are incorporated herein by reference. STOCKHOLDERS MAY READ SUCH OPINIONS   
FOR A DISCUSSION OF ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE 
REVIEWS UNDERTAKEN BY LEHMAN BROTHERS AND CHASE, IN RENDERING THEIR RESPECTIVE  
OPINIONS. For a discussion of certain of the factors that Lehman Brothers and   
Chase considered in reaching their respective opinions, see "SPECIAL FACTORS--  
Financial Advisors; Fairness Opinions" and "SPECIAL FACTORS--Background of the  
Merger."                                                                        

Purpose and Structure of the Merger. The purpose of the Merger is for Parent
to acquire control of, and the entire equity interest in, the Company. Parent   
and Westmont may enter into certain agreements by which Westmont would hold an  
equity interest in the Company. Subsequent to the Merger, Parent intends for    
the Company or its stockholder to take certain actions, including the transfer  
of certain of their assets to related entities, and the election of the Company 
or its stockholder to be treated as a real estate investment trust for federal  
income tax purposes. See "SPECIAL FACTORS--Certain Effects of the Merger." The  
acquisition of the Shares from the holders of such Shares is structured as a    
cash merger in order to transfer ownership of the Company to Parent in one      
transaction and to provide cash to the holders of such Shares. The Merger has   
been structured as a merger of Sub with and into the Company, with the Company  
to be the Surviving Corporation. As a result of the Merger, stockholders of the 
Company will not have an opportunity to continue their equity interest in the   
Company as an ongoing concern and therefore will not share in the future        
earnings and potential growth of the Company, if any.                           

INTERESTS OF CERTAIN PERSONS IN THE MERGER; POTENTIAL CONFLICTS OF INTEREST     

Certain members of the Company's management and the Board may be deemed to  
have certain interests in the Merger that are in addition to their interests as 
stockholders of the Company generally. The Board was aware of these interests   
when it considered and approved the Merger Agreement. In the aggregate, the     
directors and the executive officers of the Company will receive approximately  
$11.6 million in benefits as a result of the Merger, exclusive of the receipt   
of the Merger Consideration for their Shares. For a more detailed description   
of all benefits to be received by the directors and executive officers of the   
Company, see "SPECIAL FACTORS--Interests of Certain Persons in the Merger;      
Potential Conflicts of Interest."                                               

Stock Options. All options under the Company's 1994 Stock Option Plan (the  
"Stock Option Plan"), including options which are not yet vested, will be       
terminated immediately prior to the Effective Time, and the                     

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Company will pay to holders of options ("Options") under the Stock Option Plan  
an amount equal to the excess, if any, of the Merger Consideration over the     
exercise price of such Option, multiplied by the number of Shares subject to    
such Option, without any interest thereon (the "Option Consideration"). For a   
description of the outstanding Options held by the executive officers and       
directors of the Company as of the Record Date, see "SPECIAL FACTORS--Interests 
of Certain Persons in the Merger; Potential Conflicts of Interest--Stock        
Options."                                                                       

 Sale of Mexican Joint Venture Interest. In July 1996, Chartwell Mexico Corp.,
a Delaware corporation and a subsidiary of the Company, entered into a joint    
venture, Grupo Chartwell de Mexico, S.A. de C.V. (the "Mexican Joint Venture"), 
with a subsidiary of Grupo Piasa, S.A. de C.V., a diversified Mexican real      
estate and development company ("Grupo Piasa"), for the purpose of developing   
and operating, or franchising others to operate, lodging facilities in Mexico.  
The Mexican Joint Venture has one hotel nearing completion with 129 rooms,      
representing approximately 1% of the Company's rooms and hotels. In addition,   
it has started construction on a second hotel with 123 rooms which is expected  
to result in the addition of approximately 1% of the Company's rooms and        
hotels. The Mexican Joint Venture is a party to a master license agreement,     
dated as of September 18, 1996 (the "Master License Agreement"), with           
Travelodge Hotels, Inc. ("Travelodge"), a subsidiary of Cendant Corporation, a  
Delaware corporation ("Cendant"). Cendant is the successor to HFS Incorporated  
("HFS"). Pursuant to the Master Lease Agreement, Travelodge granted the Mexican 
Joint Venture an exclusive 30-year license to franchise the Travelodge system   
throughout Mexico. In addition, the Mexican Joint Venture has entered into a    
memorandum of understanding with Hilton Hotels to develop certain Hilton Hotel  
products in Mexico. The Mexican Joint Venture has not accounted for any of the  
Company's revenue, and accounts for approximately 2% of the Company's assets as 
measured by book value.                                                         

Grupo Piasa has the right to purchase the Company's interest in the Mexican 
Joint Venture at its fair market value in the event of a "change of control" in 
the Company. The Merger and the transactions contemplated by the Merger         
Agreement constitute a "change of control" for purposes of Grupo Piasa's right  
to purchase the Company's interest in the Mexican Joint Venture. Grupo Piasa    
has informed the Company that, as a result of the Merger, Grupo Piasa will      
exercise its right to acquire the Company's interest in the Mexican Joint       
Venture unless the Fisher, Getty and/or de Gunzberg families (or at least the   
Fisher family) and Martin L. Edelman acquire the Company's interest in the      
Mexican Joint Venture. See "SPECIAL FACTORS--Background of the Merger." An      
entity, Rio Grande Partners (the "Mexican JV Buyer"), to be formed by the       
principals of CL Associates and FSNL has agreed to purchase the Company's       
interest in the Mexican Joint Venture for a cash purchase price equal to 110%   
of all amounts expended and accrued by the Company as of the Effective Time in  
connection with or related to the Mexican Joint Venture and to indemnify the    
Company for all liabilities and expenses related to the Mexican Joint Venture.  
The Mexican JV Buyer will fund the purchase of the Company's interest in the    
Mexican Joint Venture with capital contributions from the personal funds and    
working capital of its equity owners. As of the date of the mailing of this     
Proxy Statement, the purchase price for the Company's interest in the Mexican   
Joint Venture would be $6,403,000, or approximately $0.475 per Share. The       
Company expects that this amount will increase as a result of additional        
expenditures and accruals by the Company in connection with the Mexican Joint   
Venture prior to the Effective Time, although the Company cannot predict the    
amount of that increase. The Merger Agreement does not permit the proceeds of   
the sale of the Company's interest in the Mexican Joint Venture to be           
distributed by the Company prior to the Effective Time. Those proceeds are one  
of the assets of the Company on which Parent based its bid for the Company.     
Changes in the purchase price of the Company's interest in the Mexican Joint    
Venture will not affect the amount of the Merger Consideration received by the  
Company's stockholders.                                                         

Pursuant to the Merger Agreement, Parent, Sub and the Company have agreed   
that, as a condition of the obligations of Parent and Sub to effect the Merger, 
the Company will sell its interest in the Mexican Joint Venture, and such sale  
will be for a purchase price of not less than all amounts expended or accrued   
by the Company and its subsidiaries in connection with or related to the        
Mexican Joint Venture, which amount will in no event be less than $3,750,000    
(the approximate amount expended and accrued by the Company as of the date of   
the Merger Agreement), and the Company will have no further obligations or      
liabilities with respect to its investment in the Mexican Joint Venture.        

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The Board established a special committee (the "Special Committee"),        
consisting of Rachel Robinson and Michael J. Kennedy, non-employee directors of 
the Company who are not affiliated with CL Associates or FSNL, in order to      
negotiate and oversee the proposed sale by the Company of the Company's         
interest in the Mexican Joint Venture to the Mexican JV Buyer. The Special      
Committee retained the law firm of Solovay Marshall & Edlin, P.C. ("Special     
Counsel") to assist in the sale of the Mexican Joint Venture. Special Counsel   
had previously represented special committees of the Board on various           
transactions. Pursuant to the terms of the Amended and Restated Stock Purchase  
Agreement, dated as of March 14, 1996 (the "Stock Purchase Agreement"), by and  
among the Company, National Lodging Corp., CL Associates and FSNL, have agreed  
that, for so long as CL Associates, FSNL and their affiliates continue to own,  
in the aggregate, at least 20% of the outstanding Shares, CL Associates and     
FSNL will not, and will not permit any of their affiliates to, enter into any   
transaction or series of related transactions, or grant or consent to, or       
otherwise permit, any amendment to, supplement of or waiver under, any          
agreement or contract, with the Company or any of its subsidiaries (any of the  
foregoing, an "Affiliate Transaction") unless: (i) it has been determined by a  
committee of the Board comprised of one or more non-employee directors (the     
"Independent Committee") that the Affiliate Transaction is in the best          
interests of the Company and is on fair and reasonable terms, no less favorable 
to the Company than terms that the Company and a non-affiliated person in a     
similar situation would agree to in an arms' length transaction; and (ii) if    
the Affiliate Transaction has a total value in excess of $10,000, the           
Independent Committee has received a favorable fairness opinion from an         
appropriate independent party relating to the transaction. In accordance with   
the Stock Purchase Agreement, the Special Committee retained Chase and Lehman   
Brothers to advise, and render fairness opinions to, the Special Committee with 
respect to the sale of the Mexican Joint Venture. Rather than retain a separate 
independent financial adviser, the Special Committee retained Chase and Lehman  
Brothers because of the relatively small anticipated purchase price for the     
sale of the Company's interest in the Mexican Joint Venture and their           
familiarity with the Company. On January 21, 1998, the Special Committee (i)    
determined that the sale of the Company's interest in the Mexican Joint Venture 
to the Mexican JV Buyer is in the best interests of the Company and is on fair  
and reasonable terms, no less favorable to the Company than terms that the      
Company and a non-affiliated person in a similar situation would agree to in an 
arms' length transaction, and (ii) received favorable fairness opinions from    
Lehman Brothers and Chase to the effect that such transaction is fair to the    
Company from a financial point of view. Stockholders are not being asked to     
vote upon the sale of Company's interest in the Mexican Joint Venture.          
Stockholder approval of the Merger Agreement will not constitute an explicit or 
implicit approval of that transaction should there occur a subsequent challenge 
to the fairness of that transaction to the Company despite approval of the      
transaction by the Special Committee and the receipt of the Lehman Brothers and 
Chase opinions. See "SPECIAL FACTORS--Background of the Merger" and "THE MERGER 
AGREEMENT--Conditions to Consummation of the Merger--Parent and Sub."           

Relationships with Cendant. Prior to November 22, 1994, the Company was a   
wholly-owned subsidiary of HFS, a predecessor to Cendant. On November 22, 1994, 
HFS distributed all of the Company's outstanding Shares to HFS' stockholders    
(the "Distribution"). Messrs. Edelman, Holmes and Silverman are directors of    
Cendant. Additionally, Mr. Edelman is a member of Cendant's Executive           
Committee, Mr. Silverman is the Chairman of the board and Chief Executive       
Officer of Cendant, and Mr. Holmes is Vice Chairman of Cendant. Due to such     
commonality of management, certain conflicts of interest may exist with respect 
to various matters related to the consummation of the Merger. As a result of    
the Merger, Cendant will receive, in the aggregate, a total of $9,771,000 in    
repayment of a development advance and a promissory note, as described below.   
In addition, certain of the directors, officers and employees of Cendant,       
including Messrs. Edelman, Holmes and Silverman, hold options to purchase       
Shares, including options granted under the Stock Option Plan, and will receive 
a total of $5,812,733 from the cancellation of those options in the Merger.     
Cendant may receive compensation in consideration for the consent of            
Travelodge, a subsidiary of Cendant (subject to Parent's approval) under the    
Master License Agreement (the "Master License Agreement") for the Territory of  
the Dominion of Canada by and between Travelodge and Chartwell Canada           
Hospitality Corp., a Delaware corporation and an indirect subsidiary of the     
Company ("Chartwell Canada") described below.                                   

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Required Consent of Cendant as Condition to the Merger. The Merger      
Agreement provides that the obligations of Parent and Sub to effect the     
Merger are subject to the satisfaction or waiver on or prior to the Closing 
Date of certain conditions. One of these conditions is that Parent and Sub  
will have obtained the consent or waiver of Travelodge under the Master     
License Agreement evidencing Travelodge's consent to the consummation of    
the Merger or waiving any of Travelodge's rights, if any, under such        
agreement relating to the consummation of the Merger, in form and substance 
reasonably acceptable to Parent. See "THE MERGER AGREEMENT--Conditions to   
Consummation of the Merger-- Parent and Sub."                               

Cendant Development Advance Agreement. The Company is a party to a      
Development Advance Agreement, dated as of October 1996 (the "Development   
Advance Agreement"), by and between the Company and HFS, pursuant to which  
HFS made a $2.8 million development advance (the "Development Advance") to  
the Company in December 1996. Pursuant to the Development Advance           
Agreement, the Development Advance must be repaid by the Company, without   
interest, on December 31, 2000, but the amount to be repaid will be reduced 
to the extent that hotels acquired or constructed by the Company become     
Cendant franchised hotels under franchise agreements of ten years or longer 
using any Cendant brand other than Wingate Inn. The Development Advance     
will be reduced on a dollar-for-dollar basis through December 31, 2000 for  
each dollar in initial and recurring royalty fees payable to Cendant under  
those new franchise agreements. As of the date of the mailing of this Proxy 
Statement, the amount of the Development Advance has been reduced to an     
amount equal to $2,771,000. The Development Advance Agreement is not, by    
its terms, terminable as a result of the Merger. Cendant has, however, at   
the request of the Company, consented to terminate the Development Advance  
Agreement in consideration of the payment of all amounts due to Cendant at  
the Effective Time.                                                         

Cendant Distribution Agreement. On November 22, 1994, HFS, pursuant to  
the Distribution, distributed all of the Company's outstanding Shares to    
HFS' stockholders. At the time of the Distribution, the Company and HFS     
agreed to reserve for future issuance and to issue Shares to certain        
persons (including certain current and former directors and executive       
officers of the Company) in connection with the exercise of then-           
outstanding options (the "Stapled Options") to purchase shares of HFS       
common stock that were granted pursuant to HFS' 1992 Stock Option Plan      
(which options were adjusted in connection with the Distribution so that    
the holders of such options are entitled, upon exercise thereof and without 
the payment of any additional consideration, to receive one Share for every 
ten shares of HFS common stock purchased upon such exercise, subject to     
further adjustment in certain circumstances). For a description of the      
outstanding Stapled Options held by executive officers and directors of the 
Company as of the Record Date, see "SPECIAL FACTORS--Interests of Certain   
Persons in the Merger; Potential Conflicts of Interest--Stock Options."     
Immediately prior to the Effective Time, the Company will pay to holders of 
Stapled Options an amount equal to the Merger Consideration multiplied by   
the number of Shares subject to such Stapled Option, without any interest   
thereon.                                                                    

Unsecured Note. Cendant has loaned the Company $7,000,000 pursuant to an
Unsecured Note, dated as of November 20, 1996 (the "Note"). The Company has 
promised to repay to Cendant the principal sum of $7,000,000 with interest  
thereon commencing January 1, 1997. Interest on the principal balance is    
due and payable semi-annually at 6%. Consecutive yearly installments of     
$1,000,000 each are due and payable on January 1, 1999 and on the first day 
of each January thereafter until the maturity date of the Note, on January  
1, 2005. The Merger Agreement provides that the obligation of the Parent    
and Sub to effect the Merger is subject to pre-payment of amounts           
outstanding under the Note prior to the Effective Time.                     

Financing Agreement. Pursuant to a financing agreement (the "Financing  
Agreement") entered into between the Company and Cendant, Cendant agreed to 
extend up to $75 million in guarantees, security and other credit           
enhancements ("Future Guarantees") to secure the Company's credit           
facilities ("Future Facilities") until February 28, 2003. The terms and     
conditions of each Future Facility and each Future Guaranty are required to 
be reasonably satisfactory to Cendant. Pursuant to the Financing Agreement, 
Cendant has guaranteed $75 million of the Company's $80 million Credit      
Facility. The Financing                                                     

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Agreement requires the Company to pay Cendant an annual fee equal to $1.5   
million. The Company is a party to a Credit Facility among the Company,     
Chartwell Canada Corp., which is a subsidiary of the Company, the Chase     
Manhattan Bank, as Administrative Agent, the Bank of Nova Scotia, as        
Syndication Agent, and certain other banks from time to time parties        
thereof (the "Credit Facility"). The Merger Agreement provides that the     
obligation of the Parent and Sub to effect the Merger is subject to the     
termination of the Financing Agreement without the payment of any amounts   
by the Company or any of its subsidiaries.                                  

Relationships with Terrance E. Royer. Terrance E. Royer, Chief Operating    
Officer of the Company, is an executive officer and beneficial owner of Royco   
Hotels & Resorts Ltd., a corporation incorporated under the laws of Canada      
("Royco"). Royco, the Company, Chartwell Canada, and Chartwell Lodging Inc., a  
Delaware corporation and a wholly-owned subsidiary of the Company, are parties  
to an Amended and Restated Management Services and Franchise Development        
Agreement, as amended (the "MSFDA"), pursuant to which, among other things,     
Royco agreed, on behalf of the parties to the MSFDA, to (i) develop new hotel   
and resort management business for the parties to the MSFDA with respect to     
certain Canadian hotels and resorts, (ii) develop, promote and service the      
Travelodge and Thriftlodge franchise businesses for the Company in Canada under 
the Master License Agreement and (iii) manage the Company's Canadian hotels and 
provide ongoing management assistance for the Company's U.S. hotels.            
Additionally, Mr. Royer, through an affiliate of Mr. Royer, submitted a written 
proposal to acquire the Canadian full-service and limited-service hotels and    
U.S. limited-service hotels for a purchase price of $145 million ($9.22 per     
Share), subject to a $5 million holdback to secure the Company's                
representations, warranties, covenants and indemnities in the asset purchase    
agreement. Another affiliate of Mr. Royer subsequently submitted an oral bid on 
the day the Board approved the Merger Agreement to acquire the Company, but     
that bid did not state a proposed acquisition price. See "SPECIAL FACTORS--     
Background of the Merger" and "--Interests of Certain Persons in the Merger;    
Potential Conflicts of Interest."                                               

On July 1, 1997, Royco entered into an agreement with the Company, pursuant 
to which the Company agreed to pay Royco, among other things, the sum of        
$150,000 upon the completion of the sale of the Shares or the sale of the       
Company's hotels managed by Royco.                                              

Vote of CL Associates and FSNL. CL Associates and FSNL beneficially own     
44.74% of the issued and outstanding Shares. See "SECURITY OWNERSHIP OF CERTAIN 
BENEFICIAL OWNERS AND MANAGEMENT--Security Ownerhsip of Certain Beneficial      
Owners."                                                                        

Pursuant to the Stock Purchase Agreement, CL Associates and FSNL have agreed
that, if at any time prior to August 8, 1999, the Company proposes to sell all  
or substantially all of its assets, to merge or consolidate with any other      
entity, or to cause the liquidation or dissolution of the Company (each, a      
"Triggering Event"), and the Company submits the Triggering Event to a vote of  
its stockholders, then each of CL Associates and FSNL will vote all of its      
respective Shares entitled to vote on that matter in favor of and against the   
Triggering Event in the same proportion as the numbers of Shares held by        
stockholders of the Company other than CL Associates, FSNL and their affiliates 
("Nonaffiliated Shares") voted in favor of and against the Triggering Event.    

 Therefore, with respect to the Merger, CL Associates and FSNL will vote their
respective Shares in the same proportion as the number of Shares held by        
stockholders of the Company other than CL Associates, FSNL and their affiliates 
("Nonaffiliated Shares") voted in favor of and against the Merger. The number   
of Nonaffiliated Shares voted in favor of the Merger, plus the number of Shares 
held by CL Associates and FSNL that are required to be voted in favor of the    
Merger, must equal a majority of the Shares entitled to vote on the Merger in   
order for the Merger Agreement to be approved and adopted.                      

Consulting and Employment Agreements. Parent and Sub intend to enter into a 
one year consulting agreement with Mr. Edelman following the consummation of    
the Merger, pursuant to which Mr. Edelman will provide certain consulting       
services to Parent and Sub and will receive a consulting fee of up to $250,000. 
The final terms and conditions of such consulting agreement have not yet been   
negotiated. The Company is a party                                              

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to an employment agreement with Kenneth J. Weber, Chief Financial Officer of    
the Company, pursuant to which Mr. Weber receives an annual base salary of      
$250,000, an annual bonus of $50,000 and an automobile allowance of $1,000 per  
month expiring in March 1999. That agreement is not terminable as a result of   
the Merger. No other directors or executive officers of the Company will serve  
as consultants to or be employed by Parent or its subsidiaries after the        
Effective Time.                                                                 

For a discussion of these and other interests of certain persons in the     
Merger, see "SPECIAL FACTORS--Interests of Certain Persons in the Merger;       
Potential Conflicts of Interest."                                               

Federal Income Tax Consequences. The receipt of cash by a stockholder       
pursuant to the Merger or pursuant to the exercise of stockholders' rights of   
appraisal will be a taxable event for such stockholder for federal income tax   
purposes and may also be a taxable event under applicable local, state and      
foreign tax laws. For a more complete description of certain federal income tax 
consequences of the Merger, see "SPECIAL FACTORS--Certain Federal Income Tax    
Consequences to Stockholders."                                                  

Source and Amount of Funds. Parent estimates that approximately $280 million
will be required, prior to the completion of the Merger, to (i) pay the         
aggregate Merger Consideration, (ii) pay the holders of outstanding Options,    
the Option Consideration, (iii) pay to holders of outstanding Stapled Options   
an amount equal to the Merger Consideration multiplied by the number of Shares  
subject to such Stapled Option, and (iv) pay the other expenses related to the  
Merger.                                                                         

Parent will obtain the necessary funds for the Merger from (i) capital      
contributions from its limited partners (which contributions such limited       
partners are contractually required to make at Parent's request) and (ii) a     
loan from the GS Group and/or loans from other lenders. If arrangements with    
Westmont are effected prior to the Merger, Westmont could contribute a portion  
of such funds.                                                                  

STOCKHOLDERS' RIGHTS OF APPRAISAL                                               

Holders of Shares who do not vote in favor of the Merger and who perfect    
their appraisal rights in accordance with Section 262 of the DGCL (such Shares  
being referred to herein as the "Dissenting Shares") will be entitled to        
receive, in lieu of the Merger Consideration, following a statutory appraisal   
proceeding in the Delaware Court of Chancery, cash in the amount of the fair    
value of their Shares (exclusive of any element of value arising from the       
accomplishment or expectation of the Merger) as determined by the court in such 
appraisal proceeding. For a summary of the procedures applicable to the         
perfection of appraisal rights, see "STOCKHOLDERS' RIGHTS OF APPRAISAL" and     
Annex D hereto. Because of the complexity of the procedures for exercising      
these rights, stockholders who consider exercising such rights are urged to     
seek the advice of counsel. Stockholders electing to exercise their appraisal   
rights must not vote for the approval and                                       
adoption of the Merger Agreement. If a stockholder returns a signed proxy but   
does not specify a vote against the approval and adoption of the Merger         
Agreement or a direction to abstain, the proxy will be voted FOR the approval   
and adoption of the Merger Agreement, which will have the effect of waiving     
that stockholder's appraisal rights. FAILURE TO TAKE ANY REQUIRED STEP ON A     
TIMELY BASIS IN CONNECTION WITH THE EXERCISE OF APPRAISAL RIGHTS MAY RESULT IN  
THE TERMINATION OR WAIVER OF SUCH RIGHTS. See "STOCKHOLDERS' RIGHTS OF          
APPRAISAL" discussed herein. It is a condition to the obligations of Parent and 
Sub to effect the Merger that the number of Dissenting Shares not exceed 5% of  
the outstanding Shares. See "THE MERGER AGREEMENT--Conditions to Consummation   
of the Merger--Parent and Sub."                                                 

MARKET PRICES AND DIVIDENDS                                                     

The principal market on which the Shares are traded is the Nasdaq National  
Market ("NASDAQ") under the symbol "CHRT." The Shares began public trading on   
the NASDAQ on November 14, 1994 under the                                       

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symbol "NAGC." From January 1996 until August 8, 1996, the Shares traded under  
the symbol "NALC" and since August 8, 1996, the Shares have traded under the    
symbol "CHRT." On February 5, 1998, the last trading day before the printing of 
this Proxy Statement, the high and low sales prices of the Shares were $16      
15/16 and, $16 15/16, respectively. On November 13, 1997, the last trading day  
before the public announcement of the execution of the Merger Agreement, the    
high and low sales prices of the Shares were $15 7/8 and $15 7/8, respectively. 
On June 30, 1997, the last full trading day prior to the public announcement    
that the Company had hired Bear Stearns and Chase to assist the Company in      
considering strategic alternatives, including a possible sale of the Company,   
the high and low sales prices of the Shares were $13 1/2 and $13, respectively. 
For information relating to market prices of and dividends on the Shares during 
the current year and the past two years, see "MARKET PRICES AND DIVIDENDS"      
discussed herein. STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION   
FOR THE SHARES.                                                                 

SELECTED CONSOLIDATED FINANCIAL DATA                                            

The following table sets forth selected consolidated financial data of the  
Company and its subsidiaries since inception for each of the four years ended   
December 31, 1993, 1994, 1995 and 1996. The year-end data have been derived     
from, should be read in conjunction with, and are qualified in their entirety   
by, the audited consolidated financial statements of the Company, including the 
notes thereto, for such periods. The data for the nine months ended September   
30, 1997 and 1996 were derived from the Company's unaudited quarterly financial 
statements, which in the opinion of the Company's management, reflect all       
adjustments (only normal recurring adjustments) for a fair presentation of such 
data. The data for the nine months ended September 30, 1997 and 1996 are not    
necessarily indicative of results of operations for the entire year.            

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CHARTWELL LEISURE INC. AND SUBSIDIARIES 

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

                                                                · Download Table

                            NINE MONTHS                                          
                               ENDED                                             
                           SEPTEMBER 30,         YEAR ENDED DECEMBER 31,         
                          -----------------  ----------------------------------- 
                           1997      1996      1996      1995     1994     1993  
                          -------  --------  --------  --------  -------  ------ 
                                                                                 
REVENUE                                                                          
 Hotel Revenue..........  $91,881  $ 54,111  $ 80,278  $    --   $   --   $  --  
 Management fee and                                                              
  other income..........    4,036     2,942     2,957       --       --      --  
 Equity in earnings of                                                           
  unconsolidated joint                                                           
  ventures..............    4,411     5,104     5,793       --       --      --  
                          -------  --------  --------  --------  -------  ------ 
 Total revenue..........  100,328    62,157    89,028       --       --      --  
                          -------  --------  --------  --------  -------  ------ 
OPERATING EXPENSES                                                               
 Hotel operating                                                                 
  expense...............   34,898    22,451    33,768       --       --      --  
 General and                                                                     
  administrative........   19,549    14,155    21,165     2,756    2,742     --  
 Marketing, franchise                                                            
  and reservation fees..    9,494     5,619     8,340       --       --      --  
 Maintenance and                                                                 
  property taxes........    9,214     4,296     7,450       --       --      --  
 Rent...................    3,881     3,842     5,272       --       --      --  
 Depreciation and                                                                
  amortization..........    7,267     6,615     8,585       --       --      --  
 Minority interest......    1,503       978     1,271       --       --      --  
 Office restructuring                                                            
  charge................      746       --        --        --       --      --  
 General and                                                                     
  administrative,                                                                
  related party.........      --      1,147     1,522     1,747      176     581 
 Gaming development                                                              
  costs.................      --        --        --     15,482    2,414     --  
 Provision for (recovery                                                         
  of) losses on gaming                                                           
  assets................     (250)   14,240    16,417       --       --      --  
 Costs of terminating                                                            
  corporate services                                                             
  agreement.............      --        --      9,500       --       --      --  
                          -------  --------  --------  --------  -------  ------ 
 Total operating                                                                 
  expenses..............   86,302    73,343   113,290    19,985    5,332     581 
                          -------  --------  --------  --------  -------  ------ 
OPERATING INCOME                                                                 
 (LOSS).................   14,026   (11,186)  (24,262)  (19,985)  (5,332)   (581)
INTEREST INCOME                                                                  
 (EXPENSE)-NET..........   (2,553)   (2,719)   (4,093)    2,512    1,184     128 
GAIN ON SALE OF                                                                  
 SECURITIES.............      --        --        --        --     1,044     --  
GAIN ON SALE OF FIXED                                                            
 ASSETS.................      309       --        --        --       --      --  
                          -------  --------  --------  --------  -------  ------ 
INCOME (LOSS) BEFORE                                                             
 INCOME TAX EXPENSE AND                                                          
 EXTRAORDINARY ITEM.....   11,782   (13,905)  (28,355)  (17,473)  (3,104)   (453)
INCOME TAX (EXPENSE)                                                             
 BENEFIT................   (1,023)     (213)     (274)     (709)   1,273     186 
                          -------  --------  --------  --------  -------  ------ 
INCOME (LOSS) BEFORE                                                             
 EXTRAORDINARY ITEM.....   10,759   (14,118)  (28,629)  (18,182)  (1,831)   (267)
EXTRAORDINARY LOSS ON                                                            
 EARLY EXTINGUISHMENT OF                                                         
 DEBT...................      --     (1,477)   (1,477)      --       --      --  
NET INCOME (LOSS).......  $10,759  $(15,595) $(30,106) $(18,182) $(1,831) $ (267)
                          =======  ========  ========  ========  =======  ====== 
PER SHARE INFORMATION                                                            
 Income (loss) before                                                            
  extraordinary loss....  $  0.82  $  (2.12) $  (3.84) $  (3.57) $ (0.37) $(0.05)
 Extraordinary item.....      --      (0.22)    (0.20)      --       --      --  
                          -------  --------  --------  --------  -------  ------ 
NET INCOME (LOSS).......  $  0.82  $  (2.34) $  (4.04) $  (3.57) $ (0.37) $(0.05)
                          =======  ========  ========  ========  =======  ====== 
WEIGHTED AVERAGE COMMON                                                          
 SHARES OUTSTANDING.....   13,046     6,651     7,455     5,099    5,003   5,001 
                          -------  --------  --------  --------  -------  ------ 

                                                                · Download Table

                                       AT                                      
                                  SEPTEMBER 30,         AT DECEMBER 31,        
                                 --------------- ------------------------------
                                  1997    1996    1996    1995    1994    1993 
                                 ------- ------- ------- ------- ------- ------
                                                                               
BALANCE SHEET DATA                                                             
 Total Current Assets........... $70,637 $27,788 $30,643 $62,788 $55,840 $  223
 Total Assets................... 282,638 158,229 232,038  87,074  98,895 12,238
 Total Current Liabilities......  19,340  11,306  23,175     552   1,916    197
 Total Long-Term Obligations....  82,627  17,486  94,186     --      --     -- 
 Total Liabilities and Minority                                                
  Interest...................... 106,726  32,401 120,820     552   1,916    197
 Total Stockholders' Equity..... 175,912 125,828 111,218  86,522  96,979 12,041
 Book Value Per Share........... $ 13.05 $ 13.29 $ 11.74 $ 15.87 $ 20.95 $ 2.66

                                                   (See notes to financial data)

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NOTES TO SELECTED CONSOLIDATED FINANCIAL DATA 

1. ACQUISITIONS AND SALES OF STOCK                                              

Travelodge Acquisition. On January 23, 1996, the Company acquired the       
outstanding common stock of Forte Hotels, Inc. ("FHI") for $98.8 million plus   
expenses (the "Travelodge Acquisition"). In related transactions on January 23, 
1996, prior to consummation of the Travelodge Acquisition, HFS and Motels of    
America, Inc. acquired from FHI the Travelodge franchise system and 19 hotel    
properties, respectively, for an aggregate purchase price of $71.6 million. The 
principal assets of FHI acquired by the Company included 18 hotels and joint    
venture interests in 97 other lodging facilities (twelve of which were          
subsequently disposed). The Company financed approximately $60.4 million of the 
purchase price with proceeds from a bank revolving credit facility and $38.4    
million with existing cash.                                                     

The Travelodge Acquisition was accounted for by the purchase method. The    
operating results of the acquired company are included in the consolidated      
statements of operations from its acquisition date, January 23, 1996.           

 Canadian Acquisition. On October 1, 1996, the Company acquired (the "Canadian
Acquisition") from Capital Properties Limited Partnership ("CPLP") 20 hotels    
and a one-half interest in an additional hotel, consisting of approximately     
3,500 guest rooms, which hotels are located throughout Canada and franchised    
under the "Travelodge" brand name. The Company paid approximately $70.0 million 
to purchase substantially all of CPLP's existing bank debt and to pay certain   
specified closing costs (including real estate taxes and transfer taxes), as    
well as its assumption of liability for identified trade payables and property  
specific bank debt, aggregating approximately $7.0 million. Also, the Company   
may be required to make certain contingent payments to CPLP's constituent       
partners following a preferred return to the Company. In connection with the    
Canadian Acquisition on October 1, 1996, the Company borrowed $65.9 million     
under its credit facility.                                                      

The Canadian Acquisition was accounted for by the purchase method. The      
operating results of the acquired company are included in the consolidated      
statements of operations from its acquisition date, October 1, 1996.            

 Sale of Stock. On August 8, 1996, the Company sold four million shares of the
Shares to CL Associates and FSNL for an aggregate purchase price of $57.0       
million.                                                                        

The following presents the unaudited pro forma consolidated results of      
operations for the nine months ended September 30, 1996 as if all of the        
transactions described above occurred on January 1, 1996, giving effect to the  
sale of stock and financing costs associated with the Travelodge Acquisition    
and Canadian Acquisition.                                                       

                                                                · Download Table

                                                        NINE MONTHS ENDED  
                                                        SEPTEMBER 30, 1996 
                                                       --------------------
                                                       (IN THOUSANDS EXCEPT
                                                        PER SHARE AMOUNTS) 
                                                                           
Revenue...............................................       $92,283       
Net loss..............................................       $(8,927)      
Net loss per share....................................       $  (.90)      

 The pro forma results are not necessarily indicative of the actual results of
operations that would have occurred had the transactions been consummated as    
indicated.                                                                      

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CERTAIN COMPANY PROJECTIONS                                                     

Prior to the execution of the Merger Agreement, in connection with Parent's 
review of the Company, the Company provided representatives of Parent           
information concerning projected 1997 revenues and EBITDA of the Company which  
was prepared in July 1997, and which the Company, Parent and Purchaser believe  
is not publicly available.                                                      

The information described below is presented on an unconsolidated basis and 
does not reflect consolidated adjustments. Therefore, this information cannot   
be meaningfully compared with the Company's historical consolidated financial   
data.                                                                           

CHARTWELL LEISURE INC.
PROJECTED FINANCIAL INFORMATION 
PREPARED IN JULY 1997 

                                                                · Download Table

                                                                     1997    
                                                                   FORECAST  
                                                                  ---------- 
                                                                     (IN     
                                                                  THOUSANDS) 
                                                                             
Revenue..........................................................  $135,301  
EBITDA*..........................................................    37,591**

--------                                                                        
*  Defined as earnings before interest expense, income tax expenses,            
depreciation and amortization expenses. EBITDA does not reflect any       
deduction for corporate overhead. EBITDA is a commonly used measure of    
financial performance but is not calculated in the same manner by all     
companies and should not be viewed as an accurate comparative measure.    
** Does not include approximately $1.2 million of EBITDA contributed by         
management fee income and other assets.                                   

In November 1997, following the execution of the Merger Agreement, certain  
employees of the Company provided representatives of Parent with preliminary    
information concerning projected 1998 revenues and EBITDA of the Company and    
with different projections of 1997 revenues and EBITDA which the Company,       
Parent and Sub believe are not publicly available. The projections provided in  
November 1997 were not prepared, reviewed or approved by the Company's senior   
financial officers.                                                             

CHARTWELL LEISURE INC.
PROJECTED FINANCIAL INFORMATION 
FURNISHED TO PARENT IN NOVEMBER 1997

                                                                · Download Table

                                                  1997 FORECAST 1998 FORECAST
                                                  ------------- -------------
                                                        (IN THOUSANDS)       
                                                                             
Revenue..........................................   $132,931      $140,550   
EBITDA*..........................................     34,541        37,559   

--------                                                                        

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THE COMPANY DOES NOT AS A MATTER OF COURSE MAKE PUBLIC ANY PROJECTIONS AS TO
FUTURE PERFORMANCE OR EARNINGS, AND THE PROJECTIONS SET FORTH ABOVE ARE         
INCLUDED IN THIS PROXY STATEMENT ONLY BECAUSE THE INFORMATION WAS MADE          
AVAILABLE TO REPRESENTATIVES OF PARENT BY THE COMPANY. THE COMPANY HAS INFORMED 
PARENT THAT THESE PROJECTED FINANCIAL PERFORMANCE WERE NOT PREPARED WITH A VIEW 
TO PUBLIC DISCLOSURE OR COMPLIANCE WITH THE PUBLISHED GUIDELINES OF THE         
COMMISSION OR THE GUIDELINES ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED 
PUBLIC ACCOUNTANTS REGARDING PROJECTIONS AND FORECASTS. THE COMPANY HAS ALSO    
INFORMED PARENT THAT ITS INTERNAL FINANCIAL FORECASTS (UPON WHICH THE PROJECTED 
FINANCIAL PERFORMANCE PROVIDED TO PARENT WERE BASED IN PART) ARE, IN GENERAL,   
PREPARED SOLELY FOR INTERNAL USE AND CAPITAL BUDGETING AND OTHER MANAGEMENT     
DECISION-MAKING PURPOSES AND ARE SUBJECTIVE IN MANY RESPECTS AND THUS           
SUSCEPTIBLE TO VARIOUS INTERPRETATIONS AND PERIODIC REVISION BASED ON ACTUAL    
EXPERIENCE AND BUSINESS DEVELOPMENTS. PROJECTED INFORMATION OF THIS TYPE IS     
BASED ON ESTIMATES AND ASSUMPTIONS THAT ARE INHERENTLY SUBJECT TO SIGNIFICANT   
ECONOMIC AND COMPETITIVE UNCERTAINTIES AND CONTINGENCIES, ALL OF WHICH ARE      
DIFFICULT TO PREDICT AND MANY OF WHICH ARE BEYOND THE CONTROL OF THE COMPANY,   
PARENT OR SUB OR THEIR RESPECTIVE FINANCIAL ADVISORS. MANY OF THE ASSUMPTIONS   
UPON WHICH THE FOREGOING PROJECTED FINANCIAL PERFORMANCE WERE BASED, NONE OF    
WHICH WERE APPROVED BY PARENT OR SUB, ARE DEPENDENT UPON ECONOMIC FORECASTING   
(BOTH GENERAL AND SPECIFIC TO THE COMPANY'S BUSINESSES), WHICH IS INHERENTLY    
UNCERTAIN AND SUBJECTIVE. NONE OF PARENT, SUB, THE COMPANY OR THEIR RESPECTIVE  
FINANCIAL ADVISORS ASSUMES ANY RESPONSIBILITY FOR THE ULTIMATE OUTCOME OF ANY   
OF SUCH PROJECTIONS. INCLUSION OF THE FOREGOING PROJECTIONS SHOULD NOT BE       
REGARDED AS AN INDICATION THAT PARENT, SUB, THE COMPANY OR ANY OTHER PERSON WHO 
RECEIVED SUCH INFORMATION CONSIDERS IT AN ACCURATE PREDICTION OF FUTURE EVENTS, 
AND NEITHER SUB NOR PARENT HAS RELIED ON THEM AS SUCH. NONE OF PARENT, SUB OR   
THE COMPANY, OR THEIR RESPECTIVE FINANCIAL ADVISORS, OR ANY OTHER PARTY,        
INTENDS TO PUBLICLY UPDATE OR OTHERWISE PUBLICLY REVISE THE PROJECTIONS SET     
FORTH ABOVE.                                                                    

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THE SPECIAL MEETING 

DATE, TIME AND PLACE; PURPOSE OF THE SPECIAL MEETING                            

This Proxy Statement is being furnished to the holders of Shares as of the  
Record Date in connection with the solicitation of proxies by the Board for     
use at the Special Meeting to be held on Monday, March 16, 1998 at 10:00 a.m.,  
local time, at the offices of Battle Fowler LLP, 75 East 55th Street, New       
York, New York, and at any adjournment or postponement thereof.                 

At the Special Meeting, holders of Shares as of the Record Date will be     
asked to consider and vote upon a proposal to approve and adopt the Merger      
Agreement, pursuant to which, among other things, Sub will merge with and into  
the Company. The Company, as the Surviving Corporation, will be a subsidiary    
of Parent. Pursuant to the Merger Agreement, each Share, other than Shares as   
to which dissenters' rights of appraisal have been duly asserted and perfected  
under the DGCL and Shares which are held by the Company or owned by Parent,     
Sub or any other subsidiary of Parent (which will be canceled), will be         
converted into the right to receive the Merger Consideration. As a result of    
the Merger, stockholders of the Company will not have an opportunity to         
continue their equity interest in the Company as an ongoing concern and         
therefore will not share in the future earnings and growth of the Company, if   
any. See "THE MERGER AGREEMENT--Procedure for Payment." The Company's           
stockholders also will consider and vote upon such other matters as may         
properly come before the Special Meeting.                                       

THE BOARD UNANIMOUSLY HAS DETERMINED THAT THE MERGER IS FAIR TO AND IN THE  
BEST INTERESTS OF STOCKHOLDERS, HAS APPROVED THE MERGER AGREEMENT AND           
RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE MERGER       
AGREEMENT.                                                                      

RECORD DATE, VOTING RIGHTS AND VOTE REQUIRED                                    

The Board has fixed the close of business on February 4, 1998 as the Record 
Date for the determination of holders of Shares entitled to notice of, and to   
vote at, the Special Meeting. Only holders of record of Shares at the close of  
business on the Record Date will be entitled to notice of, and to vote at, the  
Special Meeting. At the close of business on the Record Date, 13,485,999        
Shares were issued and outstanding and were held by approximately 124 holders   
of record. The Shares are the only outstanding class of voting securities of    
the Company, and each Share is entitled to one vote on each matter to be acted  
upon or which may come before the Special Meeting. Votes may be cast at the     
Special Meeting in person or by properly executed proxy. See "THE SPECIAL       
MEETING--Proxies."                                                              

The presence at the Special Meeting, either in person or by proxy, of the   
holders of a majority of the Shares entitled to vote on the Merger Agreement    
is necessary to constitute a quorum to transact business at the Special         
Meeting. Abstentions of Shares that are present at the Special Meeting and      
broker non-votes (i.e., Shares held by brokers in street name that are not      
entitled to a vote at the Special Meeting due to the absence of specific        
instructions from the beneficial owners of such Shares) are counted for the     
purpose of determining the presence of a quorum for the transaction of          
business. If a quorum is not present at the Special Meeting, the stockholders   
who are present and entitled to vote at the Special Meeting may, by majority    
vote, adjourn the Special Meeting from time to time without notice or other     
announcement until a quorum is present.                                         

Approval and adoption of the Merger Agreement requires, pursuant to the by- 
laws of the Company and applicable Delaware law, the affirmative vote of the    
holders of a majority of the outstanding Shares entitled to vote thereon. Two   
of the Company's principal stockholders, which collectively beneficially own    
44.74% of the outstanding Shares, are parties to an agreement with the Company  
which requires such stockholders to vote their Shares for and against approval  
and adoption of the Merger Agreement in the same proportion as the Shares held  
by the other stockholders of the Company voted for and against approval of the  
Merger. See "SPECIAL FACTORS--Interests of Certain Persons in the Merger;       
Potential Conflicts of Interest." In determining whether the Merger Agreement   
has received the requisite number of votes under applicable Delaware law,       
abstentions and broker non-votes will be counted and will have the same effect  
as a vote against approval and                                                  

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adoption of the Merger Agreement. THE BOARD ENCOURAGES YOU TO VOTE FOR THE      
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT BY SIGNING AND RETURNING THE      
ENCLOSED PROXY OR ATTENDING THE SPECIAL MEETING.                                

PROXIES                                                                         

This Proxy Statement is being furnished to holders of Shares as of the      
Record Date in connection with the solicitation of proxies by the Board for     
use at the Special Meeting. If a stockholder does not return a properly         
executed proxy, and does not attend the Special Meeting, such stockholder's     
Shares will not be voted, which will have the same effect as a vote against     
approval and adoption of the Merger Agreement. If signed and returned, the      
proxy will authorize the persons named as proxy to vote on the matters          
referred to therein. Shares represented by properly executed proxies received   
prior to or at the Special Meeting and not revoked will be voted in accordance  
with the instructions indicated in such proxies. It is not expected that any    
matter other than those referred to herein will be brought before the Special   
Meeting; however, if other matters are properly presented, the persons named    
as proxies will vote in accordance with their judgment with respect to such     
matters. EXECUTED PROXIES THAT CONTAIN NO INSTRUCTIONS TO THE CONTRARY WILL BE  
VOTED FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. STOCKHOLDERS ARE       
URGED TO MARK THE RELEVANT BOXES ON THE PROXY TO INDICATE HOW THEIR SHARES ARE  
TO BE VOTED.                                                                    

Any stockholder who executes and returns a proxy may revoke it at any time  
before it is voted at the Special Meeting by (i) delivering to the Secretary    
of the Company at the Company's principal offices before the Special Meeting    
an instrument of revocation bearing a later date or time than the date or time  
of the proxy being revoked; (ii) submitting a duly executed proxy bearing a     
later date or time than the date or time of the proxy being revoked; or (iii)   
voting in person at the Special Meeting. A stockholder's attendance at the      
Special Meeting will not by itself revoke a proxy given by such stockholder.    

The Special Meeting may be adjourned or postponed by the Company for any    
reason. If a quorum is not obtained, or if fewer Shares are likely to be voted  
in favor of approval and adoption of the Merger Agreement than the number       
required for approval and adoption, the Special Meeting may be adjourned for    
the purpose of obtaining additional proxies or votes. The Special Meeting may   
also be adjourned or postponed in order to obtain necessary regulatory          
approvals. Votes cast against the approval and adoption of the Merger           
Agreement will not be voted in favor of any adjournment of the Special Meeting  
for the purpose of additional solicitation of approval and adoption of the      
Merger Agreement. At any subsequent reconvening of the Special Meeting, all     
proxies will be voted in the same manner as such proxies would have been voted  
at the original convening of the meeting (except for any proxies which          
theretofore have been effectively revoked or withdrawn), notwithstanding that   
they may have been effectively voted on the same or any other matter at a       
previous meeting.                                                               

The cost of soliciting proxies will be borne by the Company. In addition to 
soliciting proxies by mail, proxies may be solicited by the Company's           
directors, officers and other employees by personal interview, telephone and    
telegram. Such persons will receive no additional compensation for such         
services. In addition, the Company has retained ChaseMellon Shareholder         
Services to assist in soliciting proxies for a fee estimated at $5,500 plus     
reimbursement of reasonable out-of-pocket expenses. The Company requests that   
brokerage houses and other custodians, nominees and fiduciaries forward         
solicitation materials to the beneficial owners of Shares held of record by     
such persons and will reimburse such brokers and other fiduciaries for their    
reasonable out-of-pocket expenses incurred when the solicitation materials are  
forwarded.                                                                      

STOCKHOLDERS SHOULD NOT FORWARD ANY STOCK CERTIFICATES WITH THEIR PROXY     
CARDS. A TRANSMITTAL FORM WITH INSTRUCTIONS FOR THE SURRENDER OF STOCK          
CERTIFICATES WILL BE MAILED TO STOCKHOLDERS SHORTLY AFTER THE EFFECTIVE TIME    
(AS DEFINED BELOW) OF THE MERGER.                                               

Exchange of Shares. As soon as reasonably practicable after the Effective   
Time, a paying agent selected by Parent ("Paying Agent") will mail to each      
record holder of a stock certificate that immediately prior to the Effective    
Time represented outstanding Shares, other than Shares as to which dissenters'  
rights of appraisal have been duly asserted and perfected under the DGCL (the   
"Certificates"), a form of letter of transmittal and instructions for use in    
effecting the surrender of Certificates for payment therefor. Stockholders      
should not surrender their Certificates together with their proxy cards for     
the Special Meeting. Upon surrender to the Paying                               

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Agent of a Certificate, together with such letter of transmittal, duly          
executed, and any other required documents, and upon acceptance thereof by the  
Paying Agent, the holder of such Certificate will be entitled to receive and    
exchange therefor cash in the amount equal to the product of the number of      
Shares represented by such Certificate multiplied by $17.25 less any            
withholding taxes and such Certificate will then be canceled. No interest will  
be paid or accrued on the cash payable upon surrender of the Certificate.       

STOCKHOLDERS' RIGHTS OF APPRAISAL                                               

Holders of Shares have the right to demand judicial appraisal of, and obtain
a cash payment for, the "fair value" of their Shares (exclusive of any element  
of value arising from the accomplishment or expectation of the Merger),         
pursuant to Section 262 of the DGCL. In order to exercise such rights, such     
holders of Shares must not vote in favor of the Merger and must comply with     
the procedural requirements of Section 262 of the DGCL. The full text of        
Section 262 of the DGCL is attached hereto as Annex D, and any stockholder of   
the Company desiring to exercise dissenters' rights of appraisal in connection  
with the Merger should consult with legal counsel prior to taking any action    
in order to ensure that the stockholder complies with the applicable statutory  
provision. Failure to take any of the steps required under Section 262 of the   
DGCL on a timely basis may result in the loss of appraisal rights. See          
"STOCKHOLDERS' RIGHTS OF APPRAISAL" and Annex D hereto. It is a condition to    
the obligations of Parent and Sub to effect the Merger that the number of       
Dissenting Shares (as defined below) not exceed 5% of the outstanding Shares.   
See "THE MERGER AGREEMENT--Conditions to Consummation of the Merger--Parent     
and Sub."                                                                       

SPECIAL FACTORS 

BACKGROUND OF THE MERGER                                                        

Pursuant to an action by written consent, on November 13, 1997, the Board   
unanimously determined that the Merger is fair to and in the best interests of  
the stockholders of the Company, approved the Merger Agreement and the          
transactions contemplated thereby, and determined to recommend to stockholders  
that they vote for approval and adoption of the Merger Agreement. See "--       
Recommendation of the Board; Fairness of the Merger," "--Interests of Certain   
Persons in the Merger; Potential Conflicts of Interest" and "CERTAIN            
INFORMATION CONCERNING PARENT AND SUB." The following discussion sets forth     
certain information relating to the background of the Merger.                   

In late 1996 and early 1997, one of the Company's goals had been to grow its
business through acquisitions. Accordingly, in the first quarter of 1997, the   
Company raised approximately $54.4 million pursuant to two equity private       
placements and a rights offering to its stockholders. This capital, together    
with the Company's lines of credit with its banking institutions, enabled the   
Company to place a greater emphasis on the acquisition of underperforming       
hotels or portfolios of hotels throughout North America. Although during this   
time, the Company engaged in preliminary discussions with third-parties in      
connection with the potential acquisition by the Company of hotels and          
portfolios of hotels, the Company determined not to proceed with any such       
potential acquisitions because, among other things, the Company believed such   
potential acquisitions were highly priced and not in the best interests of the  
stockholders of the Company.                                                    

In early June 1997, the Company engaged in preliminary discussions with Bear
Stearns to assist the Company in determining whether to explore strategic       
alternatives. On June 16, 1997, the Company engaged Bear Stearns to present a   
review of the Company's strategic alternatives. Also during June 1997, the      
Company asked Chase to participate in that review because of Chase's prior      
involvement with the Company and knowledge of the Company's assets and          
operations.                                                                     

At a June 30, 1997 meeting of the Board, Bear Stearns and Chase reviewed    
with the Board, among other things, the strategic alternatives available to     
the Company, including the possible conversion of the Company into a real       
estate investment trust, taking no action at all, and the possible sale of the  
Company. At that meeting, Bear Stearns observed, among other things, that the   
Company traded at a discount to several comparable                              

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publicly traded companies and expressed its belief that the Company's stock     
price did not fully reflect the underlying value of its assets or the           
Company's future performance. Bear Stearns also expressed its belief that       
several companies might be interested in acquiring the Company or selected      
assets of the Company at aggregate values in excess of the then market price    
of the Shares. At such meeting, Bear Stearns also reviewed a preliminary list   
of possible candidates that might be interested in acquiring the Company or     
certain of its assets should the Board decide to pursue the alternative of      
selling the Company or certain of its assets. After hearing Bear Stearns'       
presentation, the Board determined that the operating limitations in the real   
estate investment trust structure were incompatible with the Company's          
operating strategy. The Board then authorized Bear Stearns to make selected     
inquiries of other companies to determine whether they were interested in       
pursuing a potential business combination with the Company and, if so, to       
solicit preliminary indications of interest in order to determine whether a     
sale of the Company in part or in its entirety was a viable alternative. At     
such meeting, the Company's Board directed its senior management to announce    
publicly that the Company had decided to explore strategic alternatives         
available to the Company, including the possible sale of the Company, and had   
retained Bear Stearns and Chase to assist the Company in such endeavor. Mr.     
Fisher and Marc E. Leland, who are representatives of CL Associates, and Guido  
Goldman, who is a representative of FSNL, and each of whom is a director of     
the Company, stated that CL Associates and FSNL would be supportive of a sale   
at an appropriate price. At such meeting, neither the representative of CL      
Associates nor the representative of FSNL indicated any intention or interest   
with regard to a purchase of the Company or the Mexican Joint Venture. Such     
authorization by the Board, however, provided that in light of Grupo Piasa's    
right to purchase the Company's interest in the Mexican Joint Venture upon a    
change of control of the Company, and because the Company did not want the      
exercise of that right to result in renegotiation by bidders for the Company,   
bids should be solicited for the Company both including and excluding the       
Company's interest in the Mexican Joint Venture.                                

On June 30, 1997 the Company issued a press release stating that the Company
had hired Bear Stearns and Chase to assist the Company in considering           
strategic alternatives, including the possible sale of the Company. Following   
the issuance of the press release, Bear Stearns began to receive telephone      
calls from interested parties. Bear Stearns also made calls to potentially      
interested parties that had been identified to the Board at the meeting of      
June 30, 1997. The Company also entered into an engagement letter with Bear     
Stearns, dated June 30, 1997, pursuant to which Bear Stearns agreed to assist   
the Company in its consideration of those strategic alternatives.               

In August 1997, an employee of Bear Stearns who had been involved in the    
strategic review of the Company and the efforts to market the Company accepted  
a position with Lehman Brothers. To facilitate the continued dialogue with the  
interested parties and in order to continue to receive the benefit of this      
employee's work for the Company, the Company, Bear Stearns and Lehman Brothers  
agreed that Lehman Brothers would continue the process initiated by Bear        
Stearns and that Bear Stearns and Lehman Brothers each would be entitled to     
half of the fees provided for in the June 30, 1997 Bear Stearns engagement      
letter.                                                                         

During the period from June 30 to September 25, 1997, Bear Stearns, Lehman  
Brothers and Chase were in contact with approximately sixty companies or        
groups (including Parent and Westmont on a joint basis) regarding the           
feasibility of, and their interest in pursuing, a business combination with     
the Company. During that same time period, Bear Stearns and Lehman Brothers     
mailed to approximately forty such companies and groups (the "Preliminary       
Companies") a letter which described the process which the Company intended to  
conduct and also included a package of background materials regarding the       
Company. Such materials also solicited separate proposals for the Company's     
interest in the Mexican Joint Venture. Approximately fifteen companies          
expressed to Bear Stearns and Lehman Brothers significant interest in           
purchasing all or a portion of the Company, but none expressed an interest in   
purchasing the Company's interest in the Mexican Joint Venture.                 

Each of the Preliminary Companies was directed to submit a written non-     
binding indication of interest to Lehman Brothers, including, among other       
things, the prices at which they might pursue a transaction, the form of        
payment, whether or not such indication of interest would be subject to         
financing, and the likely timing of the transaction. Five of the Preliminary    
Companies and groups (including Parent and Westmont acting jointly) (the        
"Interested Companies") submitted non-binding indications of interest to        
Lehman Brothers, of which some (including an affiliate of Mr. Royer) expressed  
a non-binding indication of interest to purchase only the Canadian              

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assets and the limited-service United States hotels of the Company, of which    
some expressed a non-binding indication of interest to purchase the entire      
Company (excluding the Company's interest in the Mexican Joint Venture, but     
including the cash realized from the sale of the Mexican Joint Venture), of     
which one expressed a non-binding indication of interest to purchase only the   
U.S. full-service hotels, and none of which expressed a non-binding indication  
of interest to include the Company's interest in the Mexican Joint Venture in   
a purchase. In addition to the joint bid submitted by Parent and Westmont (as   
described below), the range of bids submitted by each of the other Interested   
Companies varied because each of these bids proposed to purchase different      
assets of the Company. Two of the Interested Companies proposed to purchase     
all of the Company's interest in the Canadian full-service and limited-service  
hotels and the U.S. limited-service hotels along with certain other assets      
owned by the Company for an aggregate purchase price of $145 million. Another   
Interested Company bid $150 million for 100% of the issued and outstanding      
shares of Chartwell Lodging Inc., a wholly-owned subsidiary of the Company.     
Finally, a fourth Interested Company bid $125 million for certain specified     
assets of the Company.                                                          

At a September 25, 1997 meeting of the Board, the Board discussed the status
of the efforts to sell all or a portion of the Company. At such meeting, the    
Board formalized the retention of Lehman Brothers. Mr. Fisher then reviewed     
with the Board the results of those marketing efforts and the nature of the     
indications of interest received from various parties. The Board discussed the  
various types of transactions which had been discussed with those parties and   
the tax and other consequences to the Company. Mr. Fisher stated that he        
expected formal bids to be received shortly and would convene another Board     
meeting to consider those bids when they were received.                         

From September 1997 to November 6, 1997, certain of the Interested Companies
conducted due diligence with respect to the Company. Each Interested Company    
was provided with access to information, oral management presentations, legal   
presentations and access to the facilities of the Company and its               
subsidiaries.                                                                   

There were two preliminary bids submitted during this period, one joint     
proposal by Parent and Westmont, and one by another bidder. On November 5,      
1997, Mr. Fisher authorized Lehman Brothers to notify Parent and Westmont, and  
the other bidder (the "Final Bidding Companies"), that final and definitive     
proposals to acquire the Company be submitted no later than 5:00 p.m., Eastern  
Standard Time, on November 10, 1997. On November 10, 1997, the Company          
received the final and definitive proposals from the Final Bidding Companies.   
Both of the Final Bidding Companies submitted a bid to acquire the Company in   
a merger transaction (excluding the Company's interest in the Mexican Joint     
Venture but including the cash realized from the sale of the Company's          
interest in the Mexican Joint Venture). Parent and Westmont jointly offered to  
pay $17.00 per Share for all of the Company's outstanding Shares and Options.   
Parent's and Westmont's offer was not subject to its ability to obtain          
financing to consummate the proposed transaction. However, Parent's and         
Westmont's offer was subject to certain material conditions requiring the       
Company to take certain actions before it would consummate a transaction. The   
other Final Bidding Company offered an aggregate of $265 million (equal to      
approximately $16.83 per Share) to acquire the Company, but conditioned its     
proposal upon obtaining the necessary financing to consummate the proposed      
transaction. Such Final Bidding Company offered to deposit $10 million in       
escrow upon the execution with the Company of a definitive agreement which      
would be paid to the Company if the Final Bidding Party was unable to obtain    
financing. In addition, that Final Bidding Company offered to deposit in        
escrow an additional $5 million if it was unable to obtain a reasonably         
satisfactory financing commitment within 30 days of the execution of a          
definitive merger agreement.                                                    

On November 11, 1997, the Board met to discuss and review, with the advice  
of Lehman Brothers, Bear Stearns and Chase, the bids submitted by the Final     
Bidding Companies. Each of Lehman Brothers and Chase presented to the Board     
its respective analysis of such bids, and delivered their respective oral       
opinions that each of such bids was fair from a financial point of view to the  
stockholders of the Company. The Board considered, among other things, the      
expense that would be incurred by the Company in order to satisfy the           
conditions proposed by each of the proposals submitted by the Final Bidding     
Companies. The Board discussed the possibility that the Final Bidding           
Companies could be induced to increase their bids and improve the terms of      
their respective proposals by relaxing the conditions set forth therein, and    
thereby eliminating some of the uncertainty of consummating a transaction with  
Parent and Westmont. Following the Board's review and                           

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discussion of the two bids, the Board authorized Mr. Fisher to negotiate with   
each of the two Final Bidding Companies the most favorable transaction to the   
stockholders of the Company. Also at the November 11, 1997 Board meeting, the   
Board established a special committee (the "Special Committee"), consisting of  
Rachel Robinson and Michael J. Kennedy, non-employee directors of the Company,  
in order to oversee and negotiate the proposed sale by the Company of its       
interest in the Mexican Joint Venture.                                          

After consulting with Lehman Brothers, Chase and Battle Fowler LLP, the     
Company's legal counsel ("Battle Fowler"), Mr. Fisher notified each of the      
Final Bidding Companies that neither of their bids would be accepted, and Mr.   
Fisher asked each of the Final Bidding Companies to submit a new bid at a       
higher price. On November 11, 1997, Parent and Westmont jointly submitted to    
the Company a revised final and definitive proposal of $17.25 per Share, which  
was subject to fewer conditions than their November 10, 1997 proposal. The      
other Final Bidding Company did not submit another bid. The Company is unaware  
of the reason or reasons that the Final Bidding Company did not submit a        
further bid. On November 11, 1997, representatives of senior management of the  
Company, Lehman Brothers, Chase and Battle Fowler met at Battle Fowler's        
offices in New York City to commence negotiations of a definitive agreement     
and plan of merger with Parent and its legal advisors, Paul, Weiss, Rifkind,    
Wharton & Garrison. Such negotiations continued in person and by telephone on   
a continuous basis through November 13, 1997.                                   

On November 13, 1997, one of the Interested Companies (not one of the Final 
Bidding Companies) submitted a written proposal to acquire all of the           
outstanding stock of the Company (but did not specify whether such bid          
included or excluded the purchase of the Mexican Joint Venture) at a purchase   
price equal to $275 million (approximately one percent (1%) higher than the     
aggregate consideration offered by Parent and Westmont in their final and       
definitive joint proposal). Additionally, on November 13, 1997, an affiliate    
of Mr. Royer submitted an oral bid to acquire the Company (which was not        
accepted by the Company), but that bid did not state the consideration to be    
received by the stockholders of the Company in that acquisition. Messrs.        
Fisher and Edelman advised each member of the Board of these bids and           
discussed with the Board members the fact that the Merger Agreement with        
Parent was almost fully negotiated and that pursuing either or both proposals   
might jeopardize the consummation of a transaction with Parent and Westmont,    
and induce Parent to withdraw its proposal. Consequently, the Board determined  
not to pursue these proposals.                                                  

On November 13, 1997, the Board, pursuant to an action by written consent,  
unanimously authorized and approved the proposed Merger Agreement and the       
transactions contemplated thereby, and authorized the execution and delivery    
of the Merger Agreement in substantially the form attached to such written      
consent (with such changes as management deemed appropriate in respect of       
certain remaining issues which were not deemed material to the overall          
transaction) and determined that the Merger Agreement be submitted to a vote    
of the stockholders of the Company, and that the Board recommend that such      
stockholders approve and adopt the Merger Agreement.                            

On November 13, 1997, each of Lehman Brothers and Chase delivered to Mr.    
Fisher, for the Board, their respective written opinions, that the              
consideration to be received by the stockholders of the Company pursuant to     
the Merger was fair from a financial point of view.                             

Negotiations between members of senior management of the Company and its    
legal advisors and representatives of Parent and their legal advisors to        
finalize the remaining issues in the Merger Agreement continued through         
November 13, 1997. On November 13, 1997, following the resolution of such open  
issues, the Company, Parent and Sub executed and delivered the Merger           
Agreement.                                                                      

On November 13, 1997, the Special Committee had an initial meeting with     
Chase and Lehman Brothers.                                                      

On November 14, 1997, the Company issued the following press release        
announcing the execution of the Merger Agreement:                               

Whitehall to Acquire Chartwell Leisure for $17.25 per Share in Cash in a
Transaction Valued at $272 Million                                          

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NEW YORK, Nov. 14 /PRNewswire/--Chartwell Leisure Inc. (Nasdaq: CHRT--  
news) today announced that it has reached an agreement in which Whitehall   
Street Real Estate Limited Partnership IX will acquire Chartwell for $17.25 
per share in cash in a transaction valued at approximately $272 million.    
Chartwell has 15,741,136 of fully diluted shares outstanding.               

Whitehall, an affiliate of Goldman, Sachs & Co., is a $1.6 billion      
discretionary real estate investment fund that invests in real estate       
opportunities worldwide. The acquisition will be made in partnership with   
Westmont Hospitality Group, Inc., a hotel investment and management         
company.                                                                    

The transaction, which was unanimously approved by Chartwell's Board of 
Directors, is expected to close in the first quarter of 1998. The companies 
signed a definitive merger agreement yesterday.                             

Richard L. Fisher, Chairman and Chief Executive Officer of Chartwell,   
said: "Today's announcement marks the end of an extensive and careful       
review of alternatives by Chartwell's Board of Directors, the goal of which 
was to maximize shareholder value. The Board firmly believes that this      
transaction provides Chartwell shareholders the best return on their        
investment in our Company."                                                 

Completion of the transaction is subject to Chartwell shareholder       
approval and customary closing conditions, including the expiration of the  
applicable waiting period under the Hart-Scott-Rodino Act.                  

Chartwell was advised by Lehman Brothers, Bear, Stearns & Co. Inc. and  
Chase Securities Inc. with regard to this transaction.                      

Chartwell Leisure is a hotel owner/operator and developer. Chartwell    
Leisure owns, directly or with joint venture partners, 124 hotel properties 
in both the full-service and limited-service segments, containing           
approximately 11,100 guest rooms, located in 25 states and six Canadian     
provinces.                                                                  

On November 24, 1997, the Special Committee had a meeting with Special      
Counsel. At this meeting, Special Counsel reviewed with the Special Committee   
the Special Committee's fiduciary and other obligations, and the agreements     
governing the Mexican Joint Venture, the Stock Purchase Agreement, the Merger   
Agreement and communications between Grupo Piasa and the Company.               

On November 25, 1997, the Special Committee had a meeting with Chase and    
Lehman Brothers at which Chase and Lehman Brothers reported to the Special      
Committee on each of their analyses and valuations of the Mexican Joint         
Venture.                                                                        

From November 25, 1997 through December 11, 1997, a member of the Special   
Committee and representatives of the Special Committee had conversations and    
negotiated with representatives of the Mexican JV Buyer concerning the form of  
the transaction and the consideration to be paid to the Company by the Mexican  
JV Buyer.                                                                       

On November 25, 1997, Parent, Sub and Company executed an amendment to the  
Merger Agreement relating to payments to be made by Parent to the Company       
immediately prior to the Effective Time. See "THE MERGER AGREEMENT--Certain     
Other Covenants--Parent Payment and Related Matters."                           

On December 11, 1997, a draft Stock Purchase Agreement (the "Draft JV       
Purchase Agreement") was agreed to by representatives of the Special Committee  
and the Mexican JV Buyer.                                                       

On January 20, 1998, the Special Committee had a meeting with Special       
Counsel at which it reviewed the conversations and negotiations between the     
Special Committee and the Mexican JV Buyer, the Draft JV Purchase Agreement, a  
calculation of the current amount expended and accrued by the Company in        
connection with the Mexican Joint Venture, the nature of the opinions to be     
delivered by Chase and Lehman Brothers and proposed action to be taken by the   
Special Committee, subject to the delivery of the opinions by Chase and Lehman  
Brothers.                                                                       

On January 21, 1998, the Special Committee had a meeting at which it (i)    
determined that the sale of the Company's interest in the Mexican Joint         
Venture to the Mexican JV Buyer is in the best interests of the Company         

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and is on fair and reasonable terms, no less favorable to the Company than      
terms that the Company and a non-affiliated person in a similar situation       
would agree to in an arm's length transaction, and (ii) received favorable      
fairness opinions from Lehman Brothers and Chase to the effect that such        
transaction is fair to the Company from a financial point of view.              

RECOMMENDATION OF THE BOARD; FAIRNESS OF THE MERGER                             

The Company. In reaching its determination that the Merger is fair to and in
the best interests of stockholders, the Board consulted with the Company's      
management, Chase, Lehman Brothers and legal counsel. Set forth below are       
factors that the Board considered to be most important in reaching this         
determination and which support the Board's finding that the Merger is (i)      
fair and (ii) in the best interests of the stockholders of the Company:         

(i) the Merger was agreed to by the Board only after issuance by the    
Company of a press release regarding its review of strategic alternatives,  
significant publicity concerning the review by the Company of its strategic 
alternatives and the possibility of the Company being sold, the passage of  
a significant period of time between issuance of the press release and      
approval of the Merger Agreement, and contact with a large number of        
potential bidders over an extended period of time in a lengthy "auction"    
process;                                                                    

(ii) based on the advice of Chase, Lehman Brothers and Bear Stearns, the
"auction" process was conducted in a fair, equitable and evenhanded manner  
and that third parties interested in a transaction with the Company were    
afforded sufficient time and knowledge to submit a proposal had they wished 
to do so. See "--Background of the Merger" and "--Financial Advisors;       
Fairness Opinion";                                                          

(iii) a review of the possible alternatives to a sale of the Company in 
its entirety, including the prospects of selling one or more of the         
subsidiaries of the Company, conversion to a real estate investment trust,  
a financial restructuring of the Company, continuing to operate the Company 
pursuant to management's business plan, the prospects of the Company if it  
remained independent, the value to the Company's stockholders of such       
alternatives and the timing and likelihood of achieving additional value    
from these alternatives, and the possibility that these alternatives might  
not lead to a higher present value to stockholders than the value of $17.25 
to be received by the holders of Shares in the Merger (see "--Background of 
the Merger");                                                               

(iv) the sale of groups of assets of the Company, such as the sale of   
only the Canadian assets and U.S. limited-service hotels or the U.S. full-  
service hotels, as some preliminary bidders had proposed, would leave the   
Company with significant tax liabilities;                                   

(v) the presentations of each of Lehman Brothers and Chase, and their   
respective opinions as to the fairness of the consideration to be received  
by holders of Shares pursuant to the Merger Agreement as discussed in "--   
Financial Advisors; Fairness Opinions"; and                                 

(vi) CL Associates and FSNL, representing 44.74% of the issued and      
outstanding Shares, each support the Merger.                                

Set forth below are factors that the Board considered, but which it believed
to be of lesser importance, in reaching this determination and which support    
the Board's finding that the Merger is (i) fair and (ii) in the best interests  
of the stockholders of the Company:                                             

(i) the Board's review and analysis of the Company's business,          
operations, financial condition, earnings and prospects, as well as the     
economic and competitive environments facing the Company, including all of  
which, as a whole, the Board believed supported its decision to pursue the  
Merger;                                                                     

(ii) the financial terms of the Merger, including the proposed structure
of the Merger involving an all cash purchase price and the absence of any   
financing contingency;                                                      

(iii) the $17.25 per Share consideration to be paid in the Merger (A)   
represents a premium for the Shares of approximately 8.6% over the closing  
price of $15 7/8 per Share on November 13, 1997, the last trading day prior 
to the public announcement of the execution of the Merger Agreement and (B) 
the per Share consideration to be paid in the Merger represents a premium   
of approximately 29% over the closing                                       

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price of $13 3/8 per Share on June 30, 1997, the last trading day prior to  
the public announcement that the Company was considering strategic          
alternatives including a possible sale of the Company;                      

(iv) the Merger Agreement permits the Company to consider unsolicited   
written proposals from non-affiliates (if required in the exercise of the   
Board's fiduciary duties to the Company or its stockholders after           
consultation and based upon the advice of outside legal counsel) to acquire 
all or a part of the Company and permits the Company to furnish information 
to and enter into discussions and negotiations with such parties and to     
terminate the Merger Agreement, subject to certain conditions, including    
the payment of significant fees and expenses to Parent and Sub (see "THE    
MERGER AGREEMENT--Effective Time," "--No Solicitation of Proposals" and "-- 
Termination");                                                              

(v) pursuant to the Stock Purchase Agreement, each of CL Associates and 
FSNL will vote all of its respective Shares in the same proportion as the   
number of Shares held by stockholders of the Company other than CL          
Associates, FSNL and their affiliates that are voted in favor of and        
against the Merger;                                                         

(vi) an entity formed by certain or all of the principals of CL         
Associates and FSNL proposed to purchase the Company's interest in the      
Mexican Joint Venture; and                                                  

(vii) the Merger Agreement was approved unanimously by the Board.       

Set forth below are certain other material factors that the Board considered
in reaching this determination and which weighed against the Board's support    
of the Merger:                                                                  

(i) certain members of the Company's management and Board have interests
in the Merger that are in addition to and not necessarily aligned with the  
interests in the Merger of the holders of Shares generally;                 

(ii) the possibility that if the Merger were announced but not          
consummated, the price of the Shares could decline significantly below the  
current trading price (which reflects, in part, the premium to be paid in   
the Merger to the holders of Shares);                                       

(iii) the terms of the Merger Agreement that set forth the restrictions 
on the conduct of the Company's business pending closing, conditions to     
closing and the significant fees and expenses that would become payable in  
the event of a termination of the Merger Agreement under certain            
circumstances; and                                                          

(iv) following the Merger, the Company's stockholders will no longer be 
able to participate in the potential growth of the Company.                 

The foregoing discussion of the information and factors considered by the   
Board sets forth a list of material factors considered by the Board, but is     
not intended to be exhaustive of all factors considered by the Board.           

THE BOARD UNANIMOUSLY HAS DETERMINED THAT THE MERGER IS FAIR TO AND IN THE  
BEST INTERESTS OF STOCKHOLDERS, HAS APPROVED THE MERGER AGREEMENT AND           
RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE MERGER       
AGREEMENT.                                                                      

Approval and adoption of the Merger Agreement requires the affirmative vote 
of the holders of a majority of the outstanding Shares entitled to vote         
thereon.                                                                        

FINANCIAL ADVISORS; FAIRNESS OPINIONS                                           

Opinion of Lehman Brothers                                                    

In September 1997, the Company engaged Lehman Brothers to act as its        
financial advisor to assist in the Board's study of strategic alternatives      
available to the Company. Prior to this time, the Company had retained Bear     
Stearns and Chase for such purpose. Due to a personnel change whereby an        
employee of Bear Stearns who had been principally responsible for the           
strategic review of the Company and the efforts to market the Company moved to  
Lehman Brothers, Lehman Brothers agreed with Bear Stearns and the Company that  
Lehman Brothers would participate with Bear Stearns as financial advisor to     
the Company and that Lehman Brothers would render                               

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the fairness opinion previously contemplated to be rendered to the Board by     
Bear Stearns. Lehman Brothers acted as the Company's financial advisor in       
soliciting indications of interest in and proposals for a potential business    
combination with the Company and negotiating with interested parties,           
including Parent and Sub. Lehman Brothers was also engaged to render its        
opinion as to the fairness, from a financial point of view, to the              
stockholders of the Company of the consideration to be received by the          
stockholders of the Company in the Merger.                                      

On November 11, 1997, in connection with the evaluation of the Merger       
Agreement and the transactions contemplated thereby by the Board, Lehman        
Brothers delivered its oral opinion, which opinion was subsequently confirmed   
in writing, that, as of November 13, 1997, and subject to assumptions, factors  
and limitations as described in that opinion, the consideration to be received  
by the stockholders of the Company in the Merger was fair, from a financial     
point of view, to the stockholders of the Company.                              

THE FULL TEXT OF THE WRITTEN OPINION OF LEHMAN BROTHERS IS ATTACHED AS ANNEX
B HERETO AND IS INCORPORATED HEREIN BY REFERENCE. STOCKHOLDERS MAY READ SUCH    
OPINION FOR A DISCUSSION OF ASSUMPTIONS MADE, MATTERS CONSIDERED AND            
LIMITATIONS ON THE REVIEW UNDERTAKEN BY LEHMAN BROTHERS IN RENDERING ITS        
OPINION. THE SUMMARY OF THE OPINION OF LEHMAN BROTHERS SET FORTH HEREIN         
DESCRIBES ALL MATERIAL ASPECTS OF THE OPINION BUT IS QUALIFIED IN ITS ENTIRETY  
BY REFERENCE TO THE FULL TEXT OF SUCH OPINION.                                  

No limitations were imposed by the Company on the scope of Lehman Brothers's
investigation or the procedures to be followed by Lehman Brothers in rendering  
its opinion. In arriving at its opinion, Lehman Brothers did not ascribe a      
specific range of values to the Company, but made its determination as to the   
fairness, from a financial point of view, of the consideration to be received   
by the stockholders of the Company on the basis of the financial and            
comparative analyses described below. Lehman Brothers' opinion is for the use   
and benefit of the Board and was rendered to the Board in connection with its   
consideration of the Merger Proposal and is not intended to be and does not     
constitute a recommendation to any Stockholder as to how such Stockholder       
should vote with respect to the Merger Proposal at the Special Meeting. Lehman  
Brothers was not requested to opine as to, and its opinion does not in any      
manner address, the Company's underlying business decision to proceed with or   
effect the Merger.                                                              

In arriving at its opinion, Lehman Brothers reviewed and analyzed: (i) the  
Merger Agreement and the terms of the Merger; (ii) publicly available           
information concerning the Company which Lehman Brothers believed to be         
relevant to its analysis; (iii) financial and operating information with        
respect to the business, operations, properties and prospects of the Company    
furnished to Lehman Brothers by the Company; (iv) a trading history of the      
Shares from January 1, 1996 to the present and a comparison of that trading     
history with those of other companies which Lehman Brothers deemed relevant;    
(v) a comparison of the historical financial results and present financial      
condition of the Company with those of other companies which Lehman Brothers    
deemed relevant; (vi) an evaluation of the specific properties of the Company   
with respect to the sale of such properties in an orderly liquidation of the    
Company; and (vii) the results of efforts to solicit indications of interest    
and proposals from third parties with respect to a purchase of all or a         
portion of the businesses and/or properties of the Company.                     

In addition, Lehman Brothers had discussions with the management of the     
Company concerning its business, operations, assets, properties, liabilities,   
financial condition and prospects and undertook such other studies, analyses    
and investigations as Lehman Brothers deemed appropriate.                       

In arriving at its opinion, Lehman Brothers assumed and relied upon the     
accuracy and completeness of the financial and other information used by it in  
arriving at its opinion without assuming any responsibility for independent     
verification of such information and further relied upon the assurances of      
management of the Company that they were not aware of any facts or              
circumstances that would make such information inaccurate or misleading. With   
respect to the financial projections of the Company for the remainder of        
fiscal year 1997,                                                               

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upon advice of the Company, Lehman Brothers assumed that such projections were  
reasonably prepared on a basis reflecting the best currently available          
estimates and judgments of the management of the Company as to the future       
financial performance of the Company during such period and that the Company    
will perform substantially in accordance with such projections during such      
period. However, in arriving at its opinion, Lehman Brothers was not provided   
with and did not have any access to detailed financial projections of the       
Company for any period subsequent to the Company's 1997 fiscal year. In         
arriving at its opinion, Lehman Brothers conducted only a limited physical      
inspection of certain of the properties and facilities of the Company and did   
not make or obtain any evaluation or appraisals of the assets or liabilities    
of the Company. Lehman Brothers' opinion was necessarily based upon market,     
economic and other conditions as they existed on, and could be evaluated as     
of, the date of its opinion.                                                    

In connection with its opinion, Lehman Brothers performed a variety of      
financial and comparative analyses, as summarized below. The preparation of a   
fairness opinion involves various determinations as to the most appropriate     
and relevant methods of financial and comparative analysis and the application  
of those methods to the particular circumstances and, therefore, such an        
opinion is not readily susceptible to summary description. Furthermore, in      
arriving at its opinion, Lehman Brothers did not attribute any particular       
weight to any analysis and factor considered by it, but rather made             
qualitative judgments as to the significance and relevance of each analysis     
and factor. Accordingly, Lehman Brothers believes that its analyses must be     
considered as a whole and that considering any portion of such analyses and     
factors considered, without considering all analyses and factors considered,    
could create a misleading or incomplete view of the process underlying its      
opinion. In its analyses, Lehman Brothers made numerous assumptions with        
respect to industry performance, general business and economic conditions, the  
competitive environment in the markets in which the Company operates and other  
matters. Many of these assumptions are beyond the control of the Company. Any   
estimates contained in these analyses are not necessarily indicative of actual  
values or predictive of future results or values, which may be significantly    
more or less favorable than as set forth therein. In addition, analyses         
relating to the value of businesses do not purport to be appraisals or to       
reflect the prices at which businesses actually may be sold.                    

Analysis of Selected Relevant Publicly Traded Companies. Using publicly     
available information, Lehman Brothers compared selected financial data of the  
Company with similar data of selected publicly-traded hotel companies engaged   
in businesses considered by Lehman Brothers to be relevant to those of the      
Company. Specifically, Lehman Brothers included in its review Bristol Hotel     
Company, CapStar Hotel Company, Red Roof Inns, Servico Inc. and John Q.         
Hammons Hotels (the "Lehman Brothers Peer Group"). Lehman Brothers analyzed     
the trading multiples of this group of comparable companies. Lehman Brothers    
calculated, among other things, current market price per share (the "Market     
Price") as a multiple of 1997 earnings per share ("EPS") for each of the        
Lehman Brothers Peer Group. The 1997 EPS per share estimates were based upon    
the median of publicly-available earnings estimates made by research analysts   
as provided by First Call Investor Services. Lehman Brothers also calculated    
total enterprise value based upon the market value of the equity ("Market       
Capitalization") as a multiple of estimated 1997 earnings before interest and   
taxes plus depreciation and amortization ("EBITDA") for each of the Lehman      
Brothers Peer Group. Lehman Brothers calculated the following multiples of the  
Lehman Peer Group: (i) a range of 13.1x to 28.5x with a mean of 20.7x for the   
ratio of Market Price to 1997 estimated EPS; and (ii) a range of 6.7x to 13.9x  
with a mean of 9.5x for the ratio of Market Price to 1997 estimated EBITDA.     
Applying these multiples to the Company indicated an imputed value of the       
Company of $10.87 to $24.23 per fully-diluted Share.                            

Because of the lack of a sufficient number of comparable companies and the  
inherent differences in the businesses, operations and prospects of the         
Company and the businesses, operations and prospects of the companies included  
in the Lehman Brothers Peer Group, Lehman Brothers believed it was              
inappropriate to, and therefore did not, rely solely on the quantitative        
results of the analysis, and accordingly also made qualitative judgments        
concerning differences between the financial and operating characteristics of   
the Company and the companies in the Lehman Brothers Peer Group, which would    
affect the public trading values of the Company and such comparable companies.  

Real Estate Valuation Analysis. Lehman Brothers estimated the value of the  
real estate assets owned by the Company, as well as the value of the non-real   
estate franchise and management businesses owned by the                         

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Company. Lehman Brothers calculated values of the Company's assets generally    
based on ranges of capitalization rates with 6.4% as the lowest capitalization  
rate in any range and 19.0% as the highest rate in any range applied to         
projected fiscal 1997 EBITDA for income producing properties, plus an           
adjustment for the estimated value of non-income producing property. Such       
capitalization rates used in this analysis were determined on the basis of      
several assumptions regarding factors such as a relatively constant inflation   
rate (between 2.0% and 4.0%), relatively stable interest rates (a yield         
between 5.0% and 7.5% on the 30-year U.S. Treasury bond) and the inherent       
business risks of the Company and the costs of equity capital (which vary       
according to the different investment risks of such properties). This analysis  
indicated an imputed equity value (defined as aggregate value minus net debt)   
of the Company of $16.62 to $19.14 per fully-diluted share.                     

Lehman Brothers also noted that the Original Real Estate Valuation Analysis 
presented by Bear Stearns to the Board in June 1997 established a range of      
$17.22 to $19.63 per fully-diluted Share. See "SPECIAL FACTORS--Background of   
the Merger."                                                                    

Historical Stock Price Analysis; Premium Analysis. Lehman Brothers          
considered various historical data concerning the history of the trading        
prices for the Shares for the period from January 1, 1996 to November 12, 1997  
(the last trading date prior to the execution of the Merger Agreement) and the  
relationship between price movements of the Shares as compared to two           
composite indices based upon the Lehman Brothers Hotel REIT Index (which is an  
index of publicly traded hotel real estate investment trusts) and upon the      
Lehman Brothers Peer Group for the same period. At November 10, 1997, the       
closing Share price of the Company was $15.875. From January 1, 1996 to         
November 10, 1997, the Shares under-performed both the Lehman Brothers Hotel    
REIT Index and an index of the Lehman Brothers Peer Group. The weighted         
average closing Share price for the period (which vary according to the         
different investment risks of such properties) January 1, 1996 through          
November 10, 1997, was $14.10.                                                  

Based on the closing price of $15.875 per Share on November 10, 1997 (the   
last trading date prior to the execution of the Merger Agreement), the $17.25   
per Share merger consideration represents an approximate 8.6% premium. Based    
on the closing price of $13.375 per Share on June 30, 1997 (the last trading    
day prior to the Company's announcement that it had retained Bear Stearns and   
Chase to study strategic alternatives for the Company), the $17.25 per Share    
merger consideration represents an approximate 29% premium. Based on the        
average closing Share price for the period January 1, 1996 through November     
12, 1997, the $17.25 per Share merger consideration represents an approximate   
22% premium.                                                                    

Lehman Brothers is an internationally recognized investment banking firm    
and, as part of its investment banking activities, is regularly engaged in the  
evaluation of businesses and their securities in connection with mergers and    
acquisitions, negotiated underwritings, competitive bids, secondary             
distributions of listed and unlisted securities, private placements and         
valuations for corporate and other purposes. The Board selected Lehman          
Brothers because of its personnel, expertise, reputation and familiarity with   
the real estate and hotel industries.                                           

Lehman Brothers has consented to the disclosure of and references to its    
opinion in this Proxy Statement. As compensation for its services in            
connection with the Merger, the Company has agreed to pay Lehman Brothers a     
fee equal to $125,000 upon execution by the Company of a letter of intent,      
agreement in principle or definitive agreement with respect to the Merger       
(which represents 50% of the fee agreed to be paid by the Company to Bear       
Stearns as described below) and a fee upon consummation of the Merger based on  
the aggregate value of the consideration received by the stockholders of the    
Company plus the aggregate principal amount of certain indebtedness for money   
borrowed assumed by Parent in connection with the Merger, net of any cash       
received by Parent to repay such debt. The fee payable to Lehman Brothers upon  
consummation of the Merger is expected to total approximately $1.36 million.    
In addition, the Company has agreed to indemnify Lehman Brothers for certain    
liabilities that may arise out of its engagement by the Company and the         
rendering of its opinion.                                                       

In the ordinary course of its business, Lehman Brothers may trade in the    
Shares for its own account and for the accounts of its customers and,           
accordingly, may at any time hold a long or short position in such securities.  

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Opinion of Chase.                                                             

Pursuant to an engagement letter dated July 9, 1997, the Board formalized   
its retention of Chase to act as its financial advisor in connection with the   
consideration by the Company of various strategic and financial alternatives    
available to it to maximize stockholder value, including the possible sale of   
all or a portion of the Company. Chase is a nationally recognized firm and, as  
a part of its investment banking activities, is regularly engaged in the        
valuation of businesses and their securities in connection with merger          
transactions and other types of acquisitions, private placements and            
valuations for corporate and other purposes. The Company selected Chase as its  
financial advisor on the basis of Chase's experience and expertise in           
transactions similar to the Merger, its reputation in the lodging and           
investment communities, and because Chase was familiar with the Company from    
having previously served as an investment banker for the Company.               

On November 11, 1997, Chase delivered its oral opinion, subsequently        
confirmed in writing as of November 13, 1997, that the consideration to be      
received by the stockholders of the Company pursuant to the Merger is fair to   
such stockholders from a financial point of view. The amount of such            
consideration was determined pursuant to negotiations between the Company and   
Parent and Sub and not pursuant to recommendations of Chase. No limitations     
were imposed by the Company on Chase with respect to the investigations made    
or procedures followed in rendering its opinion.                                

THE FULL TEXT OF CHASE'S WRITTEN OPINION TO THE COMPANY IS ATTACHED HERETO  
AS ANNEX C AND IS INCORPORATED HEREIN BY REFERENCE. THE FOLLOWING SUMMARY OF    
CHASE'S OPINION DESCRIBES ALL MATERIAL ASPECTS OF THE OPINION BUT IS QUALIFIED  
IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION. CHASE'S OPINION IS
DIRECTED TO THE BOARD AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY           
STOCKHOLDER OF THE COMPANY AS TO HOW SUCH STOCKHOLDER SHOULD VOTE WITH RESPECT  
TO THE MERGER.                                                                  

In connection with its opinion, Chase, among other things: (i) reviewed     
publicly available financial and other data with respect to the Company,        
including the consolidated financial statements for recent years and interim    
periods to September 30, 1997 and certain other relevant financial and          
operating data relating to the Company made available to Chase from published   
sources and from the internal records of the Company; (ii) reviewed the Merger  
Agreement; (iii) reviewed certain publicly available information concerning     
the trading of, and the trading market for, the Common Stock; (iv) compared     
the Company from a financial point of view with certain other companies in the  
lodging industry which Chase deemed to be relevant; (v) considered the          
financial terms, to the extent publicly available, of selected recent business  
combinations of companies in the lodging industry which Chase deemed to be      
comparable, in whole or in part, to the Merger; (vi) reviewed and discussed     
with the management of the Company certain information of a business and        
financial nature regarding the Company, furnished to Chase by them, including   
management forecasts of the Company and its portfolio of hotel properties for   
1997, and historical financial information regarding the Company's hotel        
properties; (vii) made inquiries regarding and discussed the Merger and the     
Merger Agreement and other matters related thereto with the Company's counsel;  
and (viii) performed such other analyses and examinations as Chase deemed       
appropriate. The opinion provided by Chase is based on the value of the entire  
Company, including the Mexican Joint Venture. An estimated value of $3.7        
million (representing all capital contributed by the Company as of November 6,  
1997 plus certain allocated corporate overhead expenses) was utilized as an     
estimate of the cash proceeds which were expected to be received by the         
Company in connection with the sale of the Mexican Joint Venture.               

In connection with its review, Chase did not assume any obligation          
independently to verify the foregoing information and relied on the 1997        
forecasts prepared by the Company's management and provided to Chase. Chase     
assumed for purposes of its opinion, with the consent of the Company, that the  
1997 forecasts were reasonably prepared on the basis reflecting the best        
available estimates and judgments of the Company's management at the time of    
preparation as to the future financial performance of the Company. The Company  
does not publicly disclose internal management forecasts of the type provided   
to Chase by management in                                                       

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connection with Chase's review of the proposed Merger. Such forecasts were not  
prepared with a view toward public disclosure. In addition, such forecasts      
were based upon numerous variables and assumptions that are inherently          
uncertain, including, without limitation, factors related to general economic   
and competitive conditions. Accordingly, actual results could vary              
significantly from those set forth in such forecasts. Chase has assumed no      
liability for such forecast. Chase also assumed that there have been no         
material changes in the Company's assets, financial condition, results of       
operations, business or prospects since the date of its last financial          
statements made available to Chase, except for such changes disclosed by        
management of the Company to Chase prior to the date of Chase's opinion. Chase  
relied on advice of counsel and independent accountants to the Company as to    
all legal and financial reporting matters with respect to the Company, the      
Merger and the Merger Agreement, including the status and financial reporting   
of litigation involving the Company. Chase assumed that the Merger will be      
consummated in a manner that complies in all respects with the applicable       
provisions of the Exchange Act, and other applicable federal and state          
statutes, rules and regulations. In addition, Chase did not assume              
responsibility for making an independent evaluation, appraisal or               
environmental inspection of any of the assets or liabilities (contingent or     
otherwise) of the Company, nor was Chase furnished with any such appraisals.    
Finally, Chase's opinion is based on economic, monetary, market and other       
conditions as in effect on, and the information made available to Chase as of   
the date of its opinion. Accordingly, although subsequent developments may      
affect Chase's opinion, Chase did not assume any obligation to update, revise   
or reaffirm its opinion.                                                        

Chase also assumed that the Merger will be consummated in accordance with   
the terms described in the Merger Agreement, without any further amendments     
thereto, and without waiver by the Company of any of the conditions to its      
obligations thereunder.                                                         

Set forth below is a brief summary of the report presented by Chase to the  
Board on November 11, 1997, in connection with its opinion.                     

Marketing Summary. The Company issued a press release on June 30, 1997,     
stating that it had hired Bear Stearns and Chase to "help Chartwell consider    
strategic alternatives, including a possible sale of the Company."              
Subsequently, a comprehensive marketing effort on behalf of the Company was     
conducted.                                                                      

Comparable Company Analysis. Using public and other available information,  
Chase calculated the trading multiples of estimated 1997 operating earnings     
before interest, taxes, depreciation and amortization ("EBITDA") at which       
comparable lodging companies were trading on November 8, 1997. The following    
nine publicly traded lodging companies ("Chase Peer Group") were analyzed:      
Bristol Hotel Company; Capstar Hotel Company; LaQuinta Inns, Inc.; Prime        
Hospitality Corp.; Servico Inc.; Boykin Lodging Company; Equity Inns Inc.;      
Innkeepers USA Trust and Winston Hotels Inc. Trading multiples for the Chase    
Peer Group based on November 8, 1997 closing stock prices resulted in a range   
of trading multiples from 9.0x to 13.4x estimated 1997 EBITDA. Chase evaluated  
the comparability of the Company relative to the Chase Peer Group and deemed    
certain public companies less comparable than others. Based on this analysis,   
Chase computed an adjusted range of public company trading multiples of 9.25x   
to 11.25x estimated 1997 EBITDA. Utilizing the Company's estimated 1997 EBITDA  
of $26.8 million, Chase imputed a range of value based on the adjusted public   
company trading multiples. Such analysis yielded a range of enterprise value    
from $248 million to $301 million, and a range of equity value from $15.37 to   
$18.77 per fully-diluted share. Equity value per Share for this purpose is      
equal to enterprise value less net debt of $31.8 million plus option proceeds   
divided by the 15.7 million Shares outstanding or subject to issuance.          

Comparable Transactions Analysis. To the extent information was publicly    
available, Chase reviewed the consideration paid in mergers and acquisitions    
in which the target company was deemed comparable to the Company. The           
following seven comparable transactions were reviewed (acquiror/target):        
Sunstone Hotel Investors/Kahler Realty Corp.; Equity Inns/Hampton Inn Hotels;   
Capstar Hotel/Highgate Portfolio; Tiger R/E Fund/Kahler Realty; Bristol         
Hotel/Holiday Inns; Doubletree/Red Lion Hotels; and Accor/Motel 6. Chase        
analyzed the consideration in such transactions as a multiple of the target     
companies' operating earnings before interest, taxes, deprecation and           
amortization ("EBITDA") for the latest twelve months ("LTM EBITDA").            

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Such analysis yielded a range of LTM EBITDA multiples from 6.8x to 13.8x with   
a mean and median of 10.9x and 11.5x LTM EBITDA, respectively. Chase            
determined that certain transactions were less comparable and accordingly       
adjusted the range of transaction multiples. This analysis yielded a range of   
enterprise value from $261 million to $315 million, and equity value from       
$16.22 to $19.62 per fully-diluted share. Equity value per Share for this       
purpose is equal to enterprise value less net debt of $31.8 million plus        
option proceeds divided by the 15.7 million Shares outstanding or subject to    
issuance.                                                                       

No publicly traded company or merger transaction used in the comparable     
transactions analysis is identical to the Company or the Merger. Accordingly,   
an analysis of the results of the foregoing is not mathematical; rather, it     
involves complex considerations and judgments concerning differences in         
financial and operating characteristics of the companies and other factors      
that could affect the public trading value of the companies to which the        
Company and the Merger are being compared.                                      

Analysis by Property/Asset. Chase reviewed financial information which was  
provided by the Company regarding fiscal year 1996 and 1997 estimated           
operational performance of each of the 121 hotel properties owned (in whole or  
in part) or managed by the Company and assigned an EBITDA multiple ranging      
from 5.0x to 12.0x to each of the hotel properties in the portfolio. Chase      
determined the range of EBITDA multiples which were applied to each of the      
Company's hotel properties based on a review of lease terms, average daily      
hotel rates and occupancy rates. After certain adjustments including net debt   
of $31.8 million on September 30, 1997, estimated franchise and other           
termination fees, sale proceeds from the Company's interest in the Mexican      
Joint Venture and other assets, this analysis yielded an equity value of $212   
million to $277 million, or $15.70 to $20.49 per share. Excluded from this      
analysis were costs associated with liquidating the hotel portfolio. Equity     
value per Share for this purpose is equal to enterprise value less net debt of  
$31.8 million divided by 13.5 million primary Shares, excluding costs           
associated with liquidating the portfolio and joint ventures.                   

In connection with its opinion, Chase performed procedures to reconfirm, as 
necessary, certain of the analyses described above and reviewed the             
assumptions on which such analyses were based and on the factors considered in  
connection therewith.                                                           

While the foregoing summary describes all analyses and examinations that    
Chase deems material to its opinion, it is not a comprehensive description of   
all analyses and examinations actually conducted by Chase. The preparation of   
a fairness opinion necessarily is not susceptible to partial analysis or        
summary description. Chase believes that its analyses and the summary set       
forth above must be considered as a whole and that selecting portions of its    
analyses and of the factors considered, without considering all analyses and    
factors, would create an incomplete view of the process underlying the          
analyses set forth in its presentation to the Company. Accordingly, the ranges  
of valuations resulting from any particular analysis described above should     
not be taken to be Chase's view of the actual value of the Company.             

In performing its analyses, Chase made numerous assumptions with respect to 
industry performance, general business and economic conditions and other        
matters, many of which are beyond the control of the Company. The analyses      
performed by Chase are not necessarily indicative of the actual values or       
actual future results, which may be significantly more or less favorable than   
those suggested by such analyses. Such analyses were prepared solely as part    
of Chase's analysis of the fairness, from a financial point of view, of the     
Merger consideration to the Company's stockholders and were provided to the     
Company in connection with the delivery of Chase's opinion. The analyses do     
not purport to be appraisals or to reflect the prices at which a company might  
actually be sold or the prices at which any securities may trade at any time    
in the future. Chase used in its analyses various projections of future         
performance prepared by the management of the Company. The projections are      
based on numerous variables and assumptions which are inherently unpredictable  
and must be considered not certain of occurrence as projected. Accordingly,     
actual results could vary significantly from those set forth in such            
projections.                                                                    

As described above, Chase's opinion and presentation to the Company were    
among the many factors taken into consideration by the Board in making its      
determination to approve, and to recommend that its stockholders approve, the   
Merger.                                                                         

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Chase has consented to the disclosure of the references to its opinion in   
this Proxy Statement. Pursuant to the engagement letter dated July 9, 1997,     
the Company engaged Chase to act as its financial advisor in connection with    
the consideration by the Company of various strategic and financial             
alternatives available to it. As compensation for Chase's services, the         
Company has agreed to pay Chase a fee equal to the lesser of $1 million or      
0.25% of the Merger Consideration. The fee payable to Chase upon consummation   
of the Merger is expected to total approximately $679,000. In addition, the     
Company has agreed to indemnify Chase for certain liabilities that may arise    
out of its engagement by the Company and the rendering of its opinion. Chase    
Manhattan Bank, an affiliate of Chase, is the administrative agent for the      
Company's credit facility which will be repaid at the Effective Time.           

Engagement of Bear Stearns.                                                   

In connection with its engagement by the Company, Bear Stearns analyzed and 
discussed with the Board strategic alternatives available to the Company,       
including the possible sale to the Company, and assisted the Company in         
identifying and contacting potential acquirors of all or a portion of the       
Company's business. Bear Stearns was not requested to, and did not, render any  
opinion to the Board with respect to the fairness of the Merger. As             
compensation for Bear Stearns' analysis of strategic alternatives available to  
the Company during June 1997 the Company paid Bear Stearns a fee of $100,000.   
Pursuant to an engagement letter dated June 30, 1997, the Company agreed to     
pay Bear Stearns a fee equal to $250,000 upon execution by the Company of a     
letter of intent, agreement in principle or definitive agreement with respect   
to the Merger (of which Bear Stearns, pursuant to its agreement with the        
Company and Lehman Brothers to split Bear Stearns' fee with Lehman Brothers,    
is entitled to $125,000), and a fee (the "Merger Fee") upon consummation of     
the Merger based on the aggregate value of the consideration received by the    
stockholders of the Company plus the aggregate principal amount of certain      
indebtedness for money borrowed assumed by Parent in connection with the        
Merger, net of any cash received by Parent to repay such debt. The $250,000     
fee will be credited against the Merger Fee. Based on a price for the Shares    
of $17.25 per Share, the fee payable to Bear Stearns upon consummation of the   
Merger would total approximately $1.36 million. In addition, the Company has    
agreed to indemnify Bear Stearns for certain liabilities that may arise out of  
its engagement by the Company and the rendering of its opinion.                 

PURPOSE AND STRUCTURE OF THE MERGER                                             

The purpose of the Merger is for Parent to acquire control of, and the      
entire equity interest in, the Company. Parent and Westmont may enter into      
certain agreements by which Westmont could acquire a direct interest in Sub     
and thereby would hold an equity interest in the Company. See "--Certain        
Effects of the Merger" The acquisition of the Shares from the holders of such   
Shares is structured as a cash merger in order to transfer ownership of the     
Shares to Parent in one transaction and to provide cash to the holders of such  
Shares.                                                                         

The Merger has been structured as a merger of Sub with and into the Company,
with the Company to be the Surviving Corporation, in order to provide           
flexibility with respect to certain financial, operational and tax planning     
considerations. After the Merger, the Surviving Corporation will be a           
subsidiary of Parent.                                                           

For additional information concerning the purpose of the Merger, see "--    
Background of the Merger," "--Recommendation of the Board; Fairness of the      
Merger" and "--Interests of Certain Persons in the Merger; Potential Conflicts  
of Interest" and "CERTAIN INFORMATION CONCERNING PARENT AND SUB."               

CERTAIN EFFECTS OF THE MERGER                                                   

At the Effective Time, (i) Sub will merge with and into the Company and the 
separate corporate existence of Sub will cease, (ii) the Surviving Corporation  
will be a subsidiary of Parent, (iii) all the rights, privileges, immunities,   
powers and franchises of the Company and Sub will vest in the Surviving         
Corporation and (iv) all obligations, duties, debts and liabilities of the      
Company and Sub will be the obligations, duties, debts and liabilities of the   
Surviving Corporation. The Certificate of Incorporation of the Company will be  
amended such that the Certificate of Incorporation of Sub in effect             
immediately prior to the Effective Time will be the                             

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Certificate of Incorporation of the Surviving Corporation and the By-Laws of    
Sub in effect immediately prior to the Effective Time will be the By-Laws of    
the Surviving Corporation. Immediately after the Effective Time, the directors  
and officers of Sub will be the directors of the Surviving Corporation.         

Upon completion of the Merger, Parent intends to conduct a detailed review  
of the Company and its assets, corporate structure, operations, properties,     
policies, management and personnel and consider what, if any, changes would be  
desirable in light of the circumstances which then exist. Such changes could    
include changes in the Company's business, operations, policies, property       
portfolio, corporate structure, management and personnel. Subsequent to the     
Merger, Parent intends for the Company or its stockholder to take certain       
actions, including the transfer of certain of their assets to related           
entities, and the election of the Company or its stockholder to be treated as   
a real estate investment trust for federal income tax purposes.                 

Parent presently intends to enter into management arrangements with Westmont
pursuant to which Westmont would manage the day-to-day operations of the        
Company's facilities. In addition, it is contemplated that Westmont would       
acquire a minority equity interest in the Company concurrently with or          
following consummation of the Merger for the same cost per share paid by        
Parent in the Merger.                                                           

Further, Parent is presently in discussions to sell up to an aggregate of   
10% of its equity investment in the Company to Bridge Street Real Estate Fund   
1998, L.P. ("Bridge Street") and Stone Street Real Estate Fund 1998, L.P.       
("Stone Street") for the same cost per Share paid by Parent in the Merger, at   
or following the consummation of the Merger. Bridge Street and Stone Street     
are funds affiliated with Parent established to make investments for the        
benefit of certain employees, country advisors, limited partners and managing   
directors and their spouses of Goldman, Sachs & Co. and other operating         
companies of GS Group.                                                          

In the future, Parent may seek to refinance any outstanding indebtedness of 
the Company, enter into new financing arrangements and incur new debt, sell     
equity in the Company, purchase new assets or sell some or all of the           
Company's existing assets. Additionally, Parent is exploring the feasibility    
of selling or contributing the Company's Canadian assets to an entity that      
would be controlled by Parent and/or Westmont.                                  

As a result of the Merger, the Shares will no longer be publicly traded and 
Parent will become the sole stockholder of the Surviving Corporation.           
Following the Merger, persons who were stockholders of the Company immediately  
prior to the Merger will no longer have an opportunity to continue their        
interests in the Company as an ongoing corporation and therefore will not       
share in its future earnings and potential growth. Trading in the Shares on     
NASDAQ will cease immediately following the Effective Time. At the Effective    
Time, the Shares will be delisted from NASDAQ. Registration of the Shares       
under the Exchange Act also will be terminated, as will the ongoing disclosure  
requirements thereunder.                                                        

Stockholders who properly perfect their statutory appraisal rights under and
in accordance with Section 262 of the DGCL will have the right to seek          
appraisal of their Shares. See "STOCKHOLDERS' RIGHTS OF APPRAISAL."             

INTERESTS OF CERTAIN PERSONS IN THE MERGER; POTENTIAL CONFLICTS OF INTEREST     

Certain members of the Company's management and the Board may be deemed to  
have certain interests in the Merger that are in addition to their interests    
as stockholders of the Company generally. The Board was aware of and discussed  
these interests in connection with its consideration and approval of the        
Merger Agreement. In considering the recommendation of the Board in respect of  
the Merger Agreement and the transactions contemplated thereby, the             
stockholders of the Company should be aware of these interests which may        
present actual or potential conflicts of interest with respect to the Merger.   

Stock Options. Pursuant to the Merger Agreement, the Company will (a)       
terminate the Company's 1994 Stock Option Plan (the "Stock Option Plan")        
immediately prior to the Effective Time without prejudice to the rights of the  
holders of options (the "Options") awarded pursuant thereto and (b) except for  
automatic grants of Options to directors under the Stock Option Plan, grant no  
additional Options under the Stock Option Plan. The                             

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Company has obtained the consent of each holder of an Option (whether or not    
then vested or exercisable) under the Stock Option Plan at the Effective Time   
to the cancellation of such holder's Options (without regard to the exercise    
price of such Option), to take effect immediately prior to the Effective Time.  
Each such consent requires the Company to pay in respect of each Option an      
amount equal to the excess, if any, of the Merger Consideration over the        
exercise price of such Option, multiplied by the number of Shares subject to    
such Option, without any interest thereon (the "Option Consideration").         
Notwithstanding the foregoing, payment may be withheld in respect of any        
Option until the consent of the holder thereof to its cancellation as           
contemplated hereby is obtained. The surrender of an Option to the Company      
will be deemed a release of any and all rights the holder had or may have had   
in such Option, other than the right to receive the Option Consideration in     
respect thereof.                                                                

The following presents the aggregate amounts of all benefits to be received 
by insiders, including stay bonuses, contractual severance, moving              
reimbursement, consulting arrangements and option profits exercisable as a      
direct result of the Merger.                                                    

                                                                · Download Table

                                    STAY      CONSULTING      OPTION             
                                  BONUSES     ARRANGEMENT   PROFITS(A)   TOTAL   
                                  --------    -----------   ---------- ----------
                                                                                 
Martin Edelman................... $300,000(b)  $250,000(c)  $1,693,125 $2,243,125
Michael Kennedy..................                              118,125    118,125
Richard L. Fisher................                            2,485,625  2,485,625
Marc E. Leland...................                              174,375    174,375
Douglas H. Verner(d).............                              430,625    430,625
Kenneth J. Weber(e)..............                              475,000    475,000
Samuel Rosenberg.................   50,000                     362,500    412,500
Rachel Robinson..................                               29,925     29,925
Guido Goldman....................                               29,925     29,925
Stephen Holmes...................                              205,275    205,275
Henry Silverman..................                            4,136,981  4,136,981
Len Howell(d)....................                              546,875    546,875
Adrian Werner(d).................                              265,000    265,000
Terrance Royer(f)................                               68,750     68,750

--------                                                                        
(a) Includes currently vested and non-vested options (all options vest at the   
Effective Time).                                                        
(b) Up to $300,000--to be decided by the Board.                                 
(c) Approximate--final terms have not been agreed.                              
(d) In addition, the Company has notified Douglas H. Verner, Executive Vice     
President, General Counsel and Secretary of the Company, Leonard Howell,
Jr., Vice President of Development, and Adrian Werner, Vice President of
Construction, that it will not renew the terms of their respective      
employment agreements with the Company which terminate at the end of    
February 1998. Accordingly, pursuant to such employment agreements, the 
Company is obligated to pay to Messrs. Verner, Howell and Werner,       
severance payments of $48,750, $37,500 and $37,500, respectively. The   
Company is also obligated to reimburse Mr. Howell for moving expenses in
the amount of $10,000.                                                  
(e) In addition, Mr. Weber has an employment contract with the Company through  
March 1999.                                                             
(f) Does not include any consideration to be received by Royco, of which Mr.    
Royer is an executive officer and beneficial owner, if management       
contracts covering Canadian properties owned by the Company are         
terminated.                                                             

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As of the Record Date, executive officers and directors of the Company held 
outstanding Options as follows:                                                 

                                                        · Enlarge/Download Table

                                                                       WEIGHTED                                         
                          NUMBER                             WEIGHTED  AVERAGE      VESTED      NON-VESTED              
                            OF     OPTION            NON-    AVERAGE     NON-       OPTION        OPTION        TOTAL   
NAME AND TITLE            SHARES    PRICE  VESTED   VESTED    VESTED    VESTED   CONSIDERATION CONSIDERATION   PROFIT   
--------------           --------- ------- ------- --------- --------- --------- ------------- ------------- -----------
                                                                                                                        
Martin L. Edelman.......    15,000 $ 16.75  15,000       --                       $    7,500                 $     7,500
Martin L. Edelman.......    15,000 $ 9.875  10,000     5,000                          73,750    $   36,875       110,625
Martin L. Edelman.......   300,000 $ 13.25 100,000   200,000                         400,000       800,000       118,125
Martin L. Edelman.......   150,000 $ 14.75     --    150,000                              --       375,000       375,000
                         ---------         ------- ---------                      ----------    ----------   -----------
                           480,000         125,000   355,000   13.40     13.84    $  481,250    $1,211,875    $1,693,125
Michael J. Kennedy......    15,000 $ 16.75  15,000       --                       $    7,500            --   $     7,500
Michael J. Kennedy......    15,000 $ 9.875  10,000     5,000                          73,750    $   36,875   $   110,625
                         ---------         ------- ---------                      ----------    ----------   -----------
                            30,000          25,000     5,000   14.00      9.88    $   81,250    $   36,875   $   118,125
Richard L. Fisher.......    15,000 $ 9.875  10,000     5,000                      $   73,750    $   36,875   $   110,625
Richard L. Fisher.......   500,000 $ 13.25 166,667   333,333                         666,668     1,333,332   $ 2,000,000
Richard L. Fisher.......   150,000 $ 14.75     --    150,000                              --       375,000   $   375,000
                         ---------         ------- ---------                      ----------    ----------   -----------
                           665,000         176,667   488,333   13.06     13.68    $  740,418    $1,745,207   $ 2,485,625
Marc E. Leland..........    15,000 $ 9.875  10,000     5,000                      $   73,750    $   36,875   $   110,625
Marc E. Leland..........    15,000 $ 13.00   5,000    10,000                          21,250        42,500   $    63,750
                         ---------         ------- ---------                      ----------    ----------   -----------
                            30,000          15,000    15,000   10.92     11.96    $   95,000    $   79,375   $   174,375
Douglas H. Verner.......    65,000 $10.625  21,667    43,333   10.63     10.63    $  143,544    $  287,081   $   430,625
Kenneth J. Weber........   100,000 $ 13.25  33,333    66,667                      $  133,332    $  266,668   $   400,000
Kenneth J. Weber........    30,000 $ 14.75     --     30,000                              --        75,000   $    75,000
                         ---------         ------- ---------                      ----------    ----------   -----------
                           130,000          33,333    96,667   13.25     13.72    $  133,332    $  341,668   $   475,000
Samuel Rosenberg........    75,000 $ 13.25  25,000    50,000                      $  100,000    $  200,000   $   300,000
Samuel Rosenberg........    25,000 $ 14.75     --     25,000                              --        62,500   $    62,500
                         ---------         ------- ---------                      ----------    ----------   -----------
                           100,000          25,000    75,000   13.25     13.75    $  100,000    $  262,500   $   362,500
Rachel Robinson.........    15,000 $16.875   5,000    10,000                      $    1,875    $    3,750   $     5,625
Rachel Robinson.........    15,000 $ 15.63     --     15,000                              --        24,300   $    24,300
                         ---------         ------- ---------                      ----------    ----------   -----------
                            30,000           5,000    25,000   16.88     16.13    $    1,875    $   28,050   $    29,925
Guido Goldman...........    15,000 $16.875   5,000    10,000                      $    1,875    $    3,750   $     5,625
Guido Goldman...........    15,000 $ 15.63     --     15,000                              --        24,300   $    24,300
                         ---------         ------- ---------                      ----------    ----------   -----------
                            30,000           5,000    25,000   16.88     16.13    $    1,875    $   28,050   $    29,925
Terrance Royer..........    25,000 $ 14.50  25,000       --    14.50      0.00    $   68,750            --   $    68,750
Stephen Holmes..........    11,900 $  0.00  10,650       --     0.00      0.00    $  205,275            --   $   205,275
Henry Silverman.........   239,825 $  0.00 239,825       --     0.00      0.00    $4,136,981            --   $ 4,136,981
                         ---------         ------- ---------                      ----------    ----------   -----------
Total Options........... 1,836,725         708,392 1,128,333                      $6,189,550     4,020,681   $10,210,231
                         =========         ======= =========                      ==========    ==========   ===========

Sale of Mexican Joint Venture Interest. In July 1996, Chartwell Mexico      
Corp., a Delaware corporation and a subsidiary of the Company, entered into a   
joint venture, Grupo Chartwell de Mexico, S.A. de C.V. (the "Mexican Joint      
Venture"), with a subsidiary of Grupo Piasa, S.A. de C.V., a diversified        
Mexican real estate and development company ("Grupo Piasa"), for the purpose    
of developing and operating, or franchising others to operate, lodging          
facilities in Mexico under the Travelodge and Thriftlodge brand names. The      
Mexican Joint Venture has one hotel nearing completion with 129 rooms,          
representing approximately 1% of the Company's total number of rooms and        
hotels. In addition, it has started construction on a second hotel with 123     
rooms which is expected to result in the addition of approximately 1% to the    
Company's total number of rooms and hotels. The Mexican Joint Venture is a      
party to a master license agreement (the "Master License Agreement"), dated as  
of September 18, 1996, with Travelodge Hotels, Inc. ("Travelodge"), a           
subsidiary of Cendant, pursuant to which Travelodge granted the Mexican Joint   
Venture an exclusive 30-year license to franchise the Travelodge system         
throughout Mexico. In addition, the Mexican Joint Venture has entered into a    
memorandum of understanding with Hilton Hotels to develop certain Hilton Hotel  
products in Mexico. The Mexican Joint Venture has not accounted for any of the  
Company's revenue and accounts for approximately 2% of the Company's assets as  
measured by book value.                                                         

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As described in "SPECIAL FACTORS--Background of the Merger" the Board       
offered to potential third-party bidders the opportunity to submit bids for     
the Company both including and excluding the Mexican Joint Venture. The         
Company did not receive any final and definitive proposals for the Company      
that included the Mexican Joint Venture.                                        

Grupo Piasa has the right to purchase the Company's interest in the Mexican 
Joint Venture at its fair market value in the event of a "change of control"    
in the Company. The Merger and the transactions contemplated by the Merger      
Agreement constitute a "change of control" for purposes of Grupo Piasa's right  
to purchase the Company's interest in the Mexican Joint Venture. Grupo Piasa    
has informed the Company that, as a result of the Merger, Grupo Piasa will      
exercise its right to acquire the Company's interest in the Mexican Joint       
Venture unless the Fisher, Getty and/or de Gunzberg families (or at least the   
Fisher family) and Martin L. Edelman acquire the Company's interest in the      
Mexican Joint Venture.                                                          

No third-party bidder submitted a proposal which included the purchase of   
the Mexican Joint Venture. An entity, Rio Grande Partners (the "Mexican JV      
Buyer"), to be formed by the principals of Chartwell Leisure Associates L.P.    
II, a Delaware limited partnership ("CL Associates"), and FSNL LLC, a           
Connecticut limited liability company ("FSNL"), beneficial owners of 44.74% of  
the issued and outstanding Shares, will agree to purchase the Company's         
interest in the Mexican Joint Venture for a cash purchase price equal to 110%   
of all amounts expended and accrued by the Company as of the Effective Time     
(an amount to be not less than $3,750,000) in connection with or related to     
the Mexican Joint Venture and to indemnify the Company for all liabilities and  
expenses related to the Mexican Joint Venture. The Mexican JV Buyer will fund   
the purchase of the Company's interest in the Mexican Joint Venture with        
capital contributions from the personal funds and working capital of its        
equity owners. As of the date of the mailing of this Proxy Statement, the       
purchase price for the Company's interest in the Mexican Joint Venture would    
be $6,403,000, or approximately $0.475 per Share. The Company expects that      
this amount will increase as a result of additional expenditures and accruals   
by the Company in connection with the Mexican Joint Venture prior to the        
Effective Time, although the Company cannot predict the amount of that          
increase. CL Associates is a limited partnership consisting of members of the   
Fisher Brothers' family and a trust for the benefit of Gordon Getty and         
members of his family. Richard L. Fisher, Chairman and Chief Executive Officer  
of the Company, Martin L. Edelman, President and director of the Company, Marc  
E. Leland, a director of the Company, and Arnold Fisher, a director of the      
Company, are beneficial owners of CL Associates. FSNL is a limited liability    
company owned principally by a trust for the benefit of Charles de Gunzburg.    
Guido Goldman, a director of the Company, is a Manager and beneficial owner of  
FSNL and a beneficiary of a trust that is a member of FSNL.                     

Pursuant to the Merger Agreement, Parent, Sub and the Company have agreed   
that, as a condition of the obligations of Parent and Sub to effect the         
Merger, the Company will sell its interest in the Mexican Joint Venture, and    
such sale will be for a purchase price of not less than all amounts expended    
or accrued by the Company and its subsidiaries in connection with or related    
to the Mexican Joint Venture, which amount will in no event be less than        
$3,750,000 (the approximate amount expended and accrued by the Company as of    
the date of the Merger Agreement), and the Company will have no further         
obligations or liabilities with respect to its investment in the Mexican Joint  
Venture.                                                                        

Pursuant to the Amended and Restated Stock Purchase Agreement, dated as of  
March 14, 1996 (the "Stock Purchase Agreement"), by and among the Company,      
National Lodging Corp., CL Associates and FSNL, CL Associates and FSNL have     
agreed that, for so long as CL Associates, FSNL and their affiliates continue   
to own, in the aggregate, at least 20% of the outstanding Shares, CL            
Associates and FSNL will not, and will not permit any of their affiliates to,   
enter into any transaction or series of related transactions, or grant or       
consent to, or otherwise permit, any amendment to, supplement of or waiver      
under, any agreement or contract, with the Company or any of its subsidiaries   
(any of the foregoing, an "Affiliate Transaction") unless: (i) it has been      
determined by a committee of the Board comprised of one or more non-employee    
directors (the "Independent Committee") that the Affiliate Transaction is in    
the best interests of the Company and is on fair and reasonable terms no less   
favorable to the Company than terms that the Company and a non-affiliated       
person in a similar                                                             

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situation would agree to in an arms' length transaction; and (ii) if the        
Affiliate Transaction has a total value in excess of $10,000, the Independent   
Committee has received a favorable fairness opinion from an appropriate         
independent party relating to the transaction.                                  

Pursuant to the Stock Purchase Agreement, the Board has established the     
Special Committee, consisting of Rachel Robinson and Michael J. Kennedy, non-   
employee directors of the Company, who are not affiliated with CL Associates    
or FSNL, in order to negotiate and oversee the proposed sale by the Company of  
the Company's interest in the Mexican Joint Venture to the Mexican JV Buyer.    
The Special Committee retained the law firm of Solovay Marshall & Edlin, P.C.   
("Special Counsel") to assist in the sale of the Mexican Joint Venture.         
Special Counsel had previously represented special committees of the Board on   
various transactions. Pursuant to the terms of the Stock Purchase Agreement,    
the Special Committee retained Chase and Lehman Brothers to advise, and render  
fairness opinions to, the Special Committee with respect to the sale of the     
Mexican Joint Venture. Rather than retain a separate independent financial      
adviser, the Special Committee retained Chase and Lehman Brothers because of    
the relatively small anticipated purchase price of the sale of the Mexican      
Joint Venture and their familiarity with the Company. On January 21, 1998, the  
Special Committee (i) determined that the sale of the Mexican Joint Venture to  
the Mexican JV Buyer is in the best interests of the Company and is on fair     
and reasonable terms, no less favorable to the Company than terms that the      
Company and a non-affiliated person in a similar situation would agree to in    
an arms' length transaction, and (ii) received fairness opinions from Lehman    
Brothers and Chase relating to the sale of the Mexican Joint Venture to the     
effect that such transaction is fair to the Company from a financial point of   
view. Stockholders are not being asked to vote upon the sale of the Company's   
interest in the Mexican Joint Venture. Stockholder approval of the Merger       
Agreement will not constitute an explicit or implicit approval of that          
transaction should there occur a subsequent challenge to the fairness of that   
transaction to the Company despite approval of the transaction by the Special   
Committee and receipt of the Lehman Brothers and Chase opinions. See "SPECIAL   
FACTORS--Background of the Merger"; "THE MERGER AGREEMENT--Conditions to        
Consummation of the Merger--Parent and Sub."                                    

Relationships with Cendant. Prior to November 22, 1994, the Company was a   
wholly-owned subsidiary of HFS, the predecessor to Cendant. On November 22,     
1994, HFS distributed all of the Company's outstanding Shares to HFS'           
stockholders (the "Distribution"). Messrs. Edelman, Holmes and Silverman are    
directors of Cendant. Additionally, Mr. Edelman is a member of the Executive    
Committee of Cendant, Mr. Silverman is Chairman of the Board and Chief          
Executive Officer of Cendant, and Mr. Holmes is Vice Chairman of Cendant. Due   
to such commonality of management, certain conflicts of interest may exist      
with respect to various matters related to the consummation of the Merger. As   
a result of the Merger, Cendant will receive, in the aggregate, a total of      
$9,771,000 in repayment of a development advance and a promissory note, as      
described below. In addition, certain of the directors, officers and employees  
of Cendant hold options to purchase Shares, including Options granted under     
the Stock Option Plan, and will receive a total of $5,812,733 from the          
cancellation of those options in the Merger. Cendant may receive compensation   
in consideration for the consent of Travelodge, a subsidiary of Cendant         
(subject to Parent's approval) under the Master License Agreement (the "Master  
License Agreement") for the Territory of the Dominion of Canada by and between  
Travelodge and Chartwell Canada Hospitality Corp., a Delaware corporation and   
an indirect subsidiary of the Company ("Chartwell Canada"), dated as of         
September 30, 1996, as described below.                                         

Required Consent of Cendant as Condition to the Merger. The Merger      
Agreement provides that the obligations of Parent and Sub to effect the     
Merger are subject to the satisfaction or waiver on or prior to the Closing 
Date of certain conditions. One of these conditions is that Parent and Sub  
will have obtained the consent or waiver of Travelodge under the Master     
License Agreement evidencing Travelodge's consent to the consummation of    
the Merger or waiving any of Travelodge's rights, if any, under such        
agreement relating to the consummation of the Merger, in form and substance 
reasonably acceptable to Parent. See "THE MERGER AGREEMENT--Conditions to   
Consummation of the Merger--Parent and Sub."                                

Cendant Development Advance Agreement. The Company is a party to a      
Development Advance Agreement, dated as of October 1996 (the "Development   
Advance Agreement"), by and between the Company and HFS, pursuant to which  
HFS made a $2.8 million development advance (the                            

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"Development Advance") to the Company in December 1996. Pursuant to the     
Development Advance Agreement, the Development Advance must be repaid by    
the Company, without interest, on December 31, 2000, but the amount to be   
repaid will be reduced to the extent that hotels acquired or constructed by 
the Company become Cendant franchised hotels under franchise agreements of  
ten years or longer using any Cendant brand other than Wingate Inn. The     
Development Advance will be reduced on a dollar-for-dollar basis through    
December 31, 2000 for each dollar in initial and recurring royalty fees     
payable to Cendant under those new franchise agreements. As of the date of  
the mailing of this Proxy Statement, the amount of the Development Advance  
has been reduced to an amount equal to $2,771,000. The Development Advance  
Agreement is not, by its terms, terminable as a result of the Merger.       
Cendant has, however, at the request of the Company, consented to terminate 
the Development Advance Agreement in consideration of the payment of all    
amounts due to Cendant at the Effective Time.                               

Cendant Distribution Agreement. On November 22, 1994, HFS, pursuant to  
the Distribution, distributed all of the Company's outstanding Shares to    
Cendant's stockholders. At the time of the Distribution, the Company and    
HFS agreed to reserve for future issuance and to issue Shares to certain    
persons (including certain current and former directors and executive       
officers of the Company) in connection with the exercise of then-           
outstanding options (the "Stapled Options") to purchase shares of HFS       
common stock that were granted pursuant to Cendant's 1992 Stock Option Plan 
(which options were adjusted in connection with the Distribution so that    
the holders of such options are entitled, upon exercise thereof and without 
the payment of any additional consideration, to receive one Share for every 
ten shares of HFS common stock purchased upon such exercise, subject to     
further adjustment in certain circumstances). For a description of the      
outstanding Stapled Options held by executive officers and directors of the 
Company as of the Record Date, see "SPECIAL FACTORS--Interests of Certain   
Persons in the Merger; Potential Conflicts of Interest--Stock Options."     
Immediately prior to the Effective Time, the Company will pay to holders of 
Stapled Options an amount equal to the Merger Consideration multiplied by   
the number of Shares subject to such Stapled Option, without any interest   
thereon.                                                                    

Unsecured Note. Cendant has loaned the Company $7,000,000 pursuant to an
Unsecured Note, dated as of November 20, 1996 (the "Note"). The Company has 
promised to repay to Cendant the principal sum of $7,000,000 with interest  
thereon commencing January 1, 1997. Interest on the principal balance is    
due and payable semi-annually at 6%. Consecutive yearly installments of     
$1,000,000 each are due and payable on January 1, 1999 and on the first day 
of each January thereafter until the maturity date of the Note, on January  
1, 2005. The Merger Agreement provides that prior to the Effective Time,    
the Company will repay in full the outstanding amount of the Note. The      
Merger Agreement provides that the obligation of the Parent and Sub to      
effect the Merger is subject to pre-payment of amounts outstanding under    
the Note prior to the Effective Time.                                       

Financing Agreement. Pursuant to a financing agreement (the "Financing  
Agreement") entered into between the Company and Cendant, Cendant agreed to 
extend up to $75 million in guarantees, security and other credit           
enhancements ("Future Guarantees") to secure the Company's credit           
facilities ("Future Facilities") until February 28, 2003. The terms and     
conditions of each Future Facility and each Future Guaranty are required to 
be reasonably satisfactory to Cendant. Pursuant to the Financing Agreement, 
Cendant has guaranteed $75 million of the Company's $80 million Credit      
Facility. The Financing Agreement requires the Company to pay Cendant an    
annual fee equal to $1.5 million. The Company is a party to a Credit        
Facility among the Company, Chartwell Canada Corp., which is a subsidiary   
of the Company, the Chase Manhattan Bank, as Administrative Agent, the Bank 
of Nova Scotia, as Syndication Agent; and certain other banks from time to  
time parties thereof (the "Credit Facility"). The Merger Agreement provides 
that the obligation of the Parent and Sub to effect the Merger is subject   
to the termination of the Financing Agreement without the payment of any    
amounts by the Company or any of its subsidiaries.                          

Relationships with Terrance E. Royer. Terrance E. Royer, Chief Operating    
Officer of the Company, is an executive officer and beneficial owner of Royco   
Hotels & Resorts Ltd., a corporation incorporated under the laws of Canada      
("Royco"). Royco, the Company, Chartwell Canada, and Chartwell Lodging Inc., a  
California                                                                      

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corporation and a wholly-owned subsidiary of the Company, are parties to an     
Amended and Restated Management Services and Franchise Development Agreement,   
as amended (the "MSFDA"), pursuant to which, among other things, Royco agreed,  
on behalf of the parties to the MSFDA, to (i) develop new hotel and resort      
management business for the parties to the MSFDA with respect to certain        
Canadian hotels and resorts; (ii) develop, promote and service the Travelodge   
and Thriftlodge franchise business for the Company in Canada under the Master   
License Agreement; and (iii) manage the Company's Canadian hotels and provide   
ongoing management assistance for the Company's U.S. hotels. Additionally, Mr.  
Royer, through an affiliate of Mr. Royer, submitted a written proposal to       
acquire the Canadian full-service and limited service hotels and U.S. limited   
service hotels for a purchase price of $145 million, subject to a $5 million    
holdback to secure the Company's representations, warranties, covenants and     
indemnities in the asset purchase agreement. Another affiliate of Mr. Royer     
subsequently submitted an oral bid on the day the Board approved the Merger     
Agreement to acquire the Company, but that bid did not state a proposed         
acquisition price. See "SPECIAL FACTORS--Background of the Merger" and "--      
Interests of Certain Persons in the Merger; Potential Conflicts of Interest."   

On July 1, 1997, Royco entered into an agreement with the Company, pursuant 
to which the Company agreed to pay Royco, among other things, the sum of        
$150,000 upon the completion of the sale of the Shares or the sale of the       
Company's hotels managed by Royco.                                              

Vote of CL Associates and FSNL. CL Associates and FSNL beneficially own     
44.74%, of the issued and outstanding Shares. See "SECURITY OWNERSHIP OF        
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT."                                      

Pursuant to the Stock Purchase Agreement, CL Associates and FSNL have agreed
that, if at any time prior to August 8, 1999, the Company proposes to sell all  
or substantially all of its assets, to merge or consolidate with any other      
entity, or to cause the liquidation or dissolution of the Company (each, a      
"Triggering Event"), and the Company submits the Triggering Event to a vote of  
its stockholders, then each of CL Associates and FSNL will vote all of its      
respective Shares entitled to vote on that matter in favor of and against the   
Triggering Event in the same proportion as the numbers of Shares held by        
stockholders of the Company other than CL Associates, FSNL and their            
affiliates ("Nonaffiliated Shares") voted in favor of and against the           
Triggering Event.                                                               

Therefore, with respect to the Merger, CL Associates and FSNL will vote     
their respective Shares in the same proportion as the number of Shares held by  
stockholders of the Company other than CL Associates, FSNL and their            
affiliates ("Nonaffiliated Shares") voted in favor of and against the Merger.   
The number of Nonaffiliated Shares voted in favor of the Merger plus the same   
number of Shares held by CL Associates and FSNL that are required to be voted   
in favor of the Merger must equal a majority of the Shares entitled to vote on  
the Merger in order for the Merger Agreement to be approved and adopted.        

Consulting and Employment Agreements. Parent and Sub intend to enter into a 
one year consulting agreement with Mr. Edelman following the consummation of    
the Merger pursuant to which Mr. Edelman will provide certain consulting        
services to Parent and Sub and will receive a consulting fee of up to           
$250,000. The final terms and conditions of such consulting agreement have not  
yet been negotiated. The Company is a party to an employment agreement with     
Kenneth J. Weber, Chief Financial Officer of the Company, pursuant to which     
Mr. Weber receives an annual base salary of $250,000, an annual bonus of        
$50,000 and an automobile allowance of $1,000 per month, expiring in March      
1999. That agreement is not terminable as a result of the Merger. No other      
directors or executive officers of the Company will serve as consultants to or  
be employed by Parent or its subsidiaries after the Effective Time.             

Relationships with Mr. Edelman. Mr. Edelman is of counsel to Battle Fowler  
LLP, a New York City law firm that is representing the Company in various       
matters, including the Merger Agreement and the Merger, and has represented     
the Company and certain affiliates of the Company in the past with respect to   
various legal matters.                                                          

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INDEMNIFICATION OF DIRECTORS AND OFFICERS                                       

Pursuant to the Merger Agreement, Parent, Sub and the Company have agreed   
that the certificate of incorporation and by-laws of the Surviving Corporation  
contain the provisions with respect to indemnification set forth in the         
certificate of incorporation and by-laws of the Company on the date of the      
Merger Agreement, which provisions will not be amended, repealed or otherwise   
modified for a period of six years after the Effective Time in any manner that  
would adversely affect the rights thereunder of individuals who at any time     
prior to the Effective Time were directors or officers of the Company in        
respect of actions or omissions occurring at or prior to the Effective Time     
(including, without limitation, the transactions contemplated by the Merger     
Agreement), unless such modification is required by law.                        

The Company will, and from and after the Effective Time, Parent and the     
Surviving Corporation will, indemnify, defend and hold harmless each person     
who is, or has been at any time prior to the date of the Merger Agreement or    
who becomes prior to the Effective Time, an officer or director of the Company  
(the "Indemnified Parties") against all losses, claims, damages, costs,         
expenses (including reasonable attorneys' fees and expenses), liabilities or    
judgments or amounts that are paid in settlement with the approval of the       
indemnifying party of or in connection with any threatened or actual claim,     
action, suit, proceeding or investigation based on or arising out of the fact   
that such person is or was a director or officer of the Company whether         
pertaining to any matter existing or occurring at or prior to the Effective     
Time and whether asserted or claimed prior to, or at or after, the Effective    
Time ("Indemnified Liabilities"), including all Indemnified Liabilities based   
on, or arising out of, or pertaining to the Merger Agreement or the             
transactions contemplated thereby, in each case, to the full extent a           
corporation is permitted under the DGCL to indemnify its own directors or       
officers (and Parent and the Surviving Corporation, as the case may be, will    
pay expenses in advance of the final disposition of any such action or          
proceeding to each Indemnified Party to the full extent permitted by law,       
subject to the receipt of an undertaking contemplated by Section 145(e) of the  
DGCL to refund such advances if it is determined that the Indemnified Party     
was not entitled thereto).                                                      

For a period of three years after the Effective Time, Parent will cause the 
Surviving Corporation to maintain in effect the current policies of directors'  
and officers' liability insurance maintained by the Company (provided that      
Parent may substitute therefor policies of at least the same coverage and       
amounts containing terms and conditions that are no less advantageous in any    
material respect to the Indemnified Parties) with respect to matters arising    
before the Effective Time; provided, that Parent will only be obligated to      
maintain such insurance in such scope and amount as is available at annual      
premiums during such period not in excess of 150% of the per annum rate of the  
aggregate annual premium currently paid by the Company for such insurance on    
the date of the Merger Agreement.                                               

The obligations of the Company, Parent and the Surviving Corporation are    
intended to be for the benefit of, and will be enforceable by, each             
Indemnified Party, his or her heirs and his or her personal representatives     
and will be binding on all successors and assigns of Parent, Sub, the Company   
and the Surviving Corporation. See "THE MERGER AGREEMENT--Directors' and        
Officers' Insurance and Indemnification."                                       

ACCOUNTING TREATMENT OF THE MERGER                                              

The Merger will be accounted for under the "purchase" method of accounting  
in accordance with generally accepted accounting principles. Therefore, the     
aggregate consideration paid by Sub in connection with the Merger will be       
allocated to the Company's assets and liabilities based on their fair market    
values, with any excess being treated as goodwill. The assets and liabilities   
and results of operations of the Company will be consolidated into the assets   
and liabilities and results of operations of Parent subsequent to the           
Effective Time.                                                                 

CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO STOCKHOLDERS                         

In general, under the Code, the receipt of cash by a stockholder pursuant to
the Merger or pursuant to the exercise of stockholders' rights of appraisal     
will be a taxable event for such stockholder for federal income tax purposes    
and may also be a taxable event under applicable local, state and foreign tax   
laws. Generally, a                                                              

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stockholder will recognize gain or loss for federal income tax purposes equal   
to the difference between (i) the amount of cash that he or she has received,   
and (ii) the tax basis in the Shares surrendered in exchange therefor. Such     
gain or loss will be capital gain or loss (if the Shares are held as a capital  
asset). Such gain or loss must be calculated separately for each block of       
Shares (e.g., Shares acquired at the same price in a single transaction) held   
by the stockholder. Stockholders will not be entitled to use the installment    
method to report any gain with respect to the exchange of the Shares because    
the Shares are publicly traded.                                                 

The discussion of federal income tax consequences described in the preceding
paragraph includes the material tax consequences to the stockholders of the     
Company, but does not discuss all aspects of federal income taxation that may   
be relevant to a stockholder and may not apply to (i) Shares acquired upon      
exercise of incentive stock options, non-qualified stock options or otherwise   
as compensation; (ii) certain tax-exempt stockholders; (iii) stockholders that  
are subject to special tax provisions, such as banks and insurance companies;   
(iv) certain nonresident aliens and foreign corporations; and (v) stockholders  
who do not hold the Shares as a capital asset within the meaning of Section     
1221 of the Code.                                                               

A stockholder may be subject to information reporting and to backup         
withholding at a rate of 31% of all amounts paid to the stockholder, unless     
such stockholder provides proof of an applicable exemption or a correct         
taxpayer identification number, and otherwise complies with applicable          
requirements under the Code. THE DISCUSSION OF FEDERAL INCOME TAX CONSEQUENCES  
SET FORTH ABOVE IS BASED ON EXISTING LAW AS OF THE DATE OF THIS PROXY           
STATEMENT. EACH STOCKHOLDER IS URGED TO CONSULT HIS OR HER TAX ADVISOR TO       
DETERMINE THE PARTICULAR TAX CONSEQUENCES TO HIM OR HER OF THE MERGER           
(INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX  
LAWS).                                                                          

SOURCE AND AMOUNT OF FUNDS  

Parent estimates that approximately $280 million will be required, prior to 
the completion of the Merger, to (i) pay the aggregate Merger Consideration,    
(ii) pay the holders of outstanding Options, the Option Consideration, (iii)    
pay to holders of outstanding Stapled Options an amount equal to the Merger     
Consideration multiplied by the number of Shares subject to such Stapled        
Option, and (iv) pay the other expenses related to the Merger.                  

Parent will obtain the necessary funds for the Merger from (i) capital      
contributions from its limited partners (which contributions such limited       
partners are contractually required to make at Parent's request) and (ii) a     
loan from the GS Group and/or loans from other lenders. If arrangements with    
Westmont are effected prior to the Merger, Westmont could contribute a portion  
of such funds.                                                                  

STOCKHOLDERS' RIGHTS OF APPRAISAL 

Pursuant to Section 262 of the DGCL, any holder of Shares who does not wish 
to accept the consideration to be paid pursuant to the Merger Agreement may     
dissent from the Merger and elect to have the fair value of such stockholder's  
Shares (the "Dissenting Shares") (exclusive of any element of value arising     
from the accomplishment or expectation of the Merger) judicially determined     
and paid to such stockholder in cash, together with a fair rate of interest,    
if any, provided that such stockholder complies with the provisions of Section  
262. The following discussion is not a complete statement of the law            
pertaining to appraisal rights under Delaware law, and is qualified in its      
entirety by the full text of Section 262, which is provided in its entirety as  
Annex D to this Proxy Statement. All references in Section 262 and in this      
summary to a "stockholder" are to the record holder of the Shares as to which   
appraisal rights are asserted.                                                  

Under Section 262, where a proposed merger is to be submitted for approval  
at a meeting of stockholders, the corporation must notify each of its           
stockholders that appraisal rights are available, and must include in such      
notice a copy of Section 262. This Proxy Statement constitutes such notice to   
stockholders of the Company. Any stockholder who wishes to exercise such        
appraisal rights or who wishes to preserve the right to do so should            

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review carefully Annex D to this Proxy Statement because failure to comply      
with the procedures specified in Section 262 timely and properly will result    
in the loss of appraisal rights. Moreover, because of the complexity of the     
procedures for exercising the right to seek appraisal of the Shares, the        
Company believes that stockholders who consider exercising such rights should   
seek the advice of counsel.                                                     

Any holder of Shares wishing to exercise the right to dissent from the      
Merger and demand appraisal under Section 262 of the DGCL must satisfy each of  
the following conditions:                                                       

(i) Such stockholder must deliver to the Company a written demand for   
appraisal of such stockholder's shares before the vote on the Merger        
Agreement at the Special Meeting. This written demand for appraisal must be 
in addition to and separate from any proxy or vote against the Merger       
Agreement; merely voting against, abstaining from voting or failing to vote 
in favor of approval and adoption of the Merger Agreement will not          
constitute a demand for appraisal within the meaning of Section 262.        

(ii) Such stockholder must not vote for approval and adoption of the    
Merger Agreement. A failure to vote will satisfy this requirement, but a    
vote in favor of the Merger Agreement, by proxy or in person, or the return 
of a signed proxy that does not specify a vote against approval and         
adoption of the Merger Agreement or a direction to abstain in connection    
with the proposal, will constitute a waiver of such stockholder's right of  
appraisal and will nullify any previously filed written demand for          
appraisal because, in the absence of express contrary instructions, such    
Shares will be voted in favor of the proposal. Accordingly, a stockholder   
who desires to perfect appraisal rights with respect to any of such         
stockholder's Shares must, as one of the procedural steps involved in such  
perfection, either (i) refrain from executing and returning the enclosed    
proxy card and from voting in person in favor of the proposal to approve    
the Merger Agreement, or (ii) check either the "Against" or the "Abstain"   
box next to the Proposal on such card or vote in person against the         
proposal or register in person an abstention with respect thereto.          

(iii) Such stockholder must continuously hold such shares from the date 
of making the demand through the Effective Time. Accordingly, a stockholder 
who is the record holder of Shares on the date the written demand for       
appraisal is made but who thereafter transfers such shares prior to the     
Effective Time will lose any right to appraisal in respect of such Shares.  

A demand for appraisal should be executed by or on behalf of the stockholder
of record, fully and correctly, as such stockholder's name appears on such      
stock certificates, should specify the stockholder's name and mailing address,  
the number of Shares owned and that such stockholder intends thereby to demand  
appraisal of such stockholder's Shares. If the Shares are owned of record in a  
fiduciary capacity, such as by a trustee, guardian or custodian, execution of   
the demand should be made in that capacity, and if the Shares are owned of      
record by more than one person as in a joint tenancy or tenancy in common, the  
demand should be executed by or on behalf of all owners. An authorized agent,   
including one or more joint owners, may execute a demand for appraisal on       
behalf of a stockholder; however, the agent must identify the record owner or   
owners and expressly disclose the fact that, in executing the demand, the       
agent is acting as agent for such owner or owners. A record holder such as a    
broker who holds Shares as nominee for several beneficial owners may exercise   
appraisal rights with respect to the Shares held for one or more other          
beneficial owners while not exercising such rights with respect to the Shares   
held for one or more beneficial owners; in such case, the written demand        
should set forth the number of Shares as to which appraisal is sought, and      
where no number of Shares is expressly mentioned the demand will be presumed    
to cover all Shares held in the name of the record owner. Stockholders who      
hold their Shares in brokerage accounts or other nominee forms and who wish to  
exercise appraisal rights are urged to consult with their brokers to determine  
the appropriate procedures for the making of a demand for appraisal by such a   
nominee.                                                                        

A stockholder who elects to exercise appraisal rights should mail or deliver
a written demand to: Chartwell Leisure Inc., 10 Rockefeller Plaza, Suite 1250,  
New York, New York 10020, Attention: Secretary.                                 

Within ten days after the Effective Time, the Surviving Corporation must    
give written notice that the Merger has become effective to each stockholder    
who has complied with Section 262. Any stockholder who has complied with        
Section 262 and is entitled to appraisal rights may, within 20 days after the   
date of mailing such                                                            

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notice, demand in writing from the Surviving Corporation the appraisal of such  
stockholder's Shares. Within 120 days after the Effective Time, but not         
thereafter, either the Surviving Corporation or any stockholder who has         
complied with the requirements of Section 262 may file a petition in the        
Delaware Court of Chancery demanding a determination of the value of the        
Shares held by all dissenting stockholders. Neither the Company nor Sub         
presently intends to file such a petition, and stockholders seeking to          
exercise appraisal rights should not assume that the Surviving Corporation      
will file such a petition or that the Surviving Corporation will initiate any   
negotiations with respect to the fair value of such Shares. Accordingly,        
stockholders who desire to have their Shares appraised should initiate any      
petitions necessary for the perfection of their appraisal rights within the     
time periods and in the manner prescribed in Section 262. Inasmuch as the       
Surviving Corporation has no obligation to file such a petition, the failure    
of a stockholder to do so within the period specified could nullify such        
stockholder's previous written demand for appraisal. In any event, at any time  
within 60 days after the Effective Time (or at any time thereafter with the     
written consent of the Surviving Corporation), any stockholder who has          
demanded appraisal has the right to withdraw the demand and to accept payment   
of the consideration provided in the Merger Agreement.                          

Pursuant to the Merger Agreement, the Company has agreed to give Sub prompt 
notice of any demands for appraisal of Shares received by the Company, and,     
prior to the Effective Time, (i) Sub will have the right to participate in all  
negotiations and proceedings with respect to such demands and (ii) the Company  
will not, except with the prior written consent of Sub, make any payment with   
respect to, or offer to settle, any such demands. See "THE MERGER AGREEMENT--   
Dissenting Shares."                                                             

Within 120 days after the Effective Time, any stockholder who has complied  
with the provisions of Section 262 to that point in time will be entitled to    
receive from the Surviving Corporation, upon written request, a statement       
setting forth the aggregate number of Shares not voted in favor of the Merger   
Agreement and with respect to which demands for appraisal have been received    
and the aggregate number of holders of such shares. The Surviving Corporation   
must mail such statement to the stockholder within 10 days of receipt of such   
request.                                                                        

If a petition for an appraisal is timely filed, after a hearing on such     
petition the Delaware Chancery Court will determine which stockholders are      
entitled to appraisal rights and will appraise the "fair value" of their        
Shares, exclusive of any element of value arising from the accomplishment or    
expectation of the Merger, together with a fair rate of interest, if any, to    
be paid upon the amount determined to be the fair value. The costs of the       
action may be determined by the Delaware Chancery Court and taxed upon the      
parties as the Delaware Chancery Court deems equitable. Upon application of a   
dissenting stockholder, the Delaware Chancery Court may also order that all or  
a portion of the expenses incurred by any stockholder in connection with the    
appraisal proceeding, including, without limitation, reasonable attorneys'      
fees and the fees and expenses of experts, be charged pro rata against the      
value of all of the Shares entitled to appraisal. STOCKHOLDERS CONSIDERING      
SEEKING APPRAISAL SHOULD BE AWARE THAT THE FAIR VALUE OF THEIR SHARES AS        
DETERMINED UNDER SECTION 262 COULD BE MORE THAN, THE SAME AS OR LESS THAN THE   
CONSIDERATION THEY WOULD RECEIVE PURSUANT TO THE MERGER AGREEMENT IF THEY DID   
NOT SEEK APPRAISAL OF THEIR SHARES AND THAT INVESTMENT BANKING OPINIONS ARE     
NOT OPINIONS AS TO FAIR VALUE UNDER SECTION 262.                                

In determining fair value, the Delaware Chancery Court is to take into      
account all relevant factors. In Weinberger v. UOP, Inc., the Delaware Supreme  
Court discussed the factors that could be considered in determining fair value  
in an appraisal proceeding, stating that "proof of value by any techniques or   
methods which are generally considered acceptable in the financial community    
and otherwise admissible in court" should be considered, and that "fair price   
obviously requires consideration of all relevant factors involving the value    
of a company." The Delaware Supreme Court stated that, in making this           
determination of fair value, the court must consider market value, asset        
value, dividends, earnings prospects, the nature of the enterprise and any      
other facts which could be ascertained as of the date of the merger that throw  
any light on future prospects of the merged corporation. In Weinberger, the     
Delaware Supreme Court stated that "elements of future value, including the     
nature of the enterprise, which are known or susceptible of proof as of the     
date of the merger and not the product of speculation, may be considered."      
Section 262 provides that fair value is to be "exclusive of any element of      
value arising from the accomplishment or expectation of the merger."            

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Any stockholder who has duly demanded an appraisal in compliance with       
Section 262 will not, after the Effective Time, be entitled to vote the Shares  
subject to such demand for any purpose or be entitled to the payment of         
dividends or other distributions on those shares (except dividends or other     
distributions payable to holders of record of Shares as of a record date prior  
to the Effective Time).                                                         

At any time within 60 days after the Effective Time, any stockholder who has
demanded appraisal rights will have the right to withdraw such demand for       
appraisal and to accept the terms offered in the Merger; after this period,     
the stockholder may withdraw such demand for appraisal only with the consent    
of the Surviving Corporation. If no petition for appraisal is filed with the    
Delaware Chancery Court within 120 days after the Effective Time, or if such    
stockholder has withdrawn such demand for appraisal as discussed in the         
preceding sentence, such stockholder's rights to appraisal will cease, and all  
holders of Shares will be entitled to receive the Merger Consideration. Any     
stockholder may withdraw such stockholder's demand for appraisal by delivering  
to the Surviving Corporation a written withdrawal of such stockholder's demand  
for appraisal and acceptance of the Merger, except that (i) any such attempt    
to withdraw made more than 60 days after the Effective Time will require        
written approval of the Surviving Corporation and (ii) no appraisal proceeding  
in the Delaware Chancery Court will be dismissed as to any stockholder without  
the approval of the Delaware Chancery Court, and such approval may be           
conditioned upon such terms as the Delaware Chancery Court deems just.          

FAILURE TO COMPLY STRICTLY WITH THE PROCEDURES SET FORTH IN SECTION 262 OF  
THE DGCL WILL RESULT IN THE LOSS OF A STOCKHOLDER'S STATUTORY APPRAISAL         
RIGHTS. CONSEQUENTLY, ANY STOCKHOLDER WISHING TO EXERCISE APPRAISAL RIGHTS IS   
URGED TO CONSULT LEGAL COUNSEL BEFORE ATTEMPTING TO EXERCISE SUCH RIGHTS.       

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THE MERGER AGREEMENT  

The following is a summary of the material provisions of the Merger         
Agreement not summarized elsewhere in this Proxy Statement. The following       
summary does not purport to be complete and is qualified in its entirety by     
reference to the Merger Agreement, which is attached as Annex A to this Proxy   
Statement and is incorporated herein by reference. References to sections       
herein refer to the corresponding sections in the Merger Agreement.             
Capitalized terms not otherwise defined in this Proxy Statement or in the       
following summary have the respective meanings set forth in the Merger          
Agreement.                                                                      

EFFECTIVE TIME                                                                  

The Merger will become effective, and the Effective Time will occur, upon   
the filing of a Certificate of Merger with the Secretary of State of the State  
of Delaware as required by the DGCL or at such later time as specified in such  
certificate. Such filing will be made contemporaneously with or as promptly as  
practicable following the closing date under the Merger Agreement, which will   
take place as soon as practicable following the last to be satisfied or waived  
of all of the conditions set forth in the Merger Agreement (other than the      
delivery of certain bring-down certificates), or such other time as agreed to   
in writing by the Company, Parent and Sub (the "Closing Date"). There can be    
no assurance as to if or when the Merger will be consummated. If the Merger     
has not been consummated on or prior to May 15, 1998, the Merger Agreement may  
be terminated by either the Company or Parent, unless there has been a          
material breach of its obligations under the Merger Agreement. See "--          
Conditions to Consummation of the Merger" and "--Termination." (SECTIONS 1.1,   
1.2, 1.3 AND 8.1)                                                               

MERGER CONSIDERATION; CONVERSION OF SHARES                                      

At the Effective Time, each Share (other than Dissenting Shares and Shares  
issued and outstanding immediately prior to the Effective Time held by the      
Company, Parent, Sub or any other subsidiary of Parent) will be converted into  
the right to receive the Merger Consideration. See "--Procedure for Payment."   
All such Shares, when so converted, will no longer be outstanding and will      
automatically be canceled and retired and will cease to exist, and each holder  
of Shares will cease to have any rights with respect thereto (including,        
without limitation, the right to vote), except the right to receive the Merger  
Consideration, without interest, upon surrender of certificates representing    
such Shares. (SECTION 3.1)                                                      

STOCK OPTIONS                                                                   

Immediately prior to the Effective Time, the Company will (i) terminate the 
Company's 1994 Stock Option Plan (the "Stock Option Plan") without prejudice    
to the rights of the holders of options (the "Options") awarded pursuant        
thereto and (ii) except for automatic grants of Options to directors of the     
Company under the Stock Option Plan, grant no additional Options under the      
Stock Option Plan. The Company will obtain the consent of each holder of an     
Option (whether or not then exercisable) under the Stock Option Plan at the     
Effective Time to the cancellation of such holder's Options (without regard to  
the exercise price of such Option), to take effect immediately prior to the     
Effective Time. Each such consent will require the Company to pay in respect    
of each Option, an amount equal to the excess, if any, of the Merger            
Consideration over the exercise price of such Option, multiplied by the number  
of Shares subject to such Option, without any interest thereon (the "Option     
Consideration"). Notwithstanding the foregoing, payment may be withheld in      
respect of any Option until the consent of the holder thereof to its            
cancellation as contemplated thereby is obtained. The surrender of an Option    
to the Company will be deemed a release of any and all rights the holder had    
or may have had in such Option, other than the right to receive the Option      
Consideration in respect thereof. (SECTION 2.2)                                 

PROCEDURE FOR PAYMENT                                                           

Prior to the Effective Time, Parent will deposit or cause to be deposited   
with or for the account of the Paying Agent for the benefit of the              
stockholders cash in an aggregate amount sufficient to pay the Merger           
Consideration                                                                   

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(hereinafter referred to as the "Payment Fund"). For purposes of determining    
the Payment Fund, Parent will assume that no stockholder will perfect his       
right to appraisal of his Shares. Promptly after the Effective Time but in no   
event later than five business days after the Effective Time, Parent will mail  
or cause the Paying Agent to mail to each holder of record a certificate or     
certificates, which immediately prior to the Effective Time evidenced           
outstanding Shares (the "Certificates"), a form of letter of transmittal        
(which will specify that delivery will be effected, and risk of loss and title  
to the Certificates will pass, only upon proper delivery of the Certificates    
to the Paying Agent and will be in such form and have such other provisions as  
Parent may reasonably specify) and instructions for use in effecting the        
surrender of the Certificates in exchange for payment therefor. Upon surrender  
of a Certificate for cancellation to the Paying Agent, together with such       
letter of transmittal, duly executed and such other customary documents as may  
be required pursuant to such instructions, the holder of such Certificate will  
be entitled to receive in exchange therefor cash in an amount equal to the      
product of (x) the number of Shares theretofore represented by such             
Certificate and (y) the Merger Consideration, and, in either case, the          
Certificate so surrendered will forthwith be canceled. No interest will be      
paid or accrued on the Merger Consideration payable upon the surrender of any   
Certificate. If payment is to be made to a person other than the person in      
whose name the surrendered Certificate is registered, it will be a condition    
of payment that the Certificate so surrendered will be promptly endorsed or     
otherwise in proper form for transfer and that the person requesting such       
payment will pay any transfer or other taxes required by reason of the payment  
to a person other than the registered holder of the surrendered Certificate or  
established to the satisfaction of Parent and the Surviving Corporation that    
such tax has been paid or is not applicable.                                    

STOCKHOLDERS SHOULD NOT FORWARD CERTIFICATES TO THE PAYING AGENT UNTIL THEY 
HAVE RECEIVED TRANSMITTAL FORMS. STOCKHOLDERS SHOULD NOT RETURN CERTIFICATES    
WITH THE ENCLOSED PROXY.                                                        

The Merger Consideration paid upon the surrender of Certificates in         
accordance with the terms of the Merger Agreement will be deemed to have been   
issued and paid in full satisfaction of all rights pertaining to the Shares     
theretofore represented by such Certificates. At and after the Effective Time,  
there will be no registration of transfers of Shares which were outstanding     
immediately prior to the Effective Time on the stock transfer books of the      
Surviving Corporation. If, after the Effective Time, Certificates are           
presented to the Surviving Corporation for any reason, such Certificates will   
be canceled and exchanged for cash as provided in the Merger Agreement. At the  
close of business on the day of the Effective Time, the stock ledger of the     
Company will be closed.                                                         

The Paying Agent will invest the Payment Fund, as directed by Parent, in (i)
direct obligations of the United States of America, (ii) obligations for which  
the full faith and credit of the United States of America is pledged to         
provide for the payment of principal and interest, (iii) commercial paper       
rated the highest quality by either Moody's Investors Services, Inc. or         
Standard & Poor's Corporation, or (iv) certificates of deposit, bank            
repurchase agreements or bankers' acceptances of commercial banks with capital  
exceeding $500 million; and any net earnings with respect to the Payment Fund   
will be the property of and paid over to Parent as and when requested by        
Parent; provided, however, that any Taxes payable with respect to the Payment   
Fund will be the sole obligation and liability of Parent; provided, further     
that any such investment or any such payment of earnings will not delay the     
timely receipt by holders of Certificates of the Merger Consideration or        
otherwise impair such holders' respective rights hereunder.                     

Any portion of the Payment Fund which remains undistributed to the holders  
of Certificates for 365 days after the Effective Time will be delivered to      
Parent, upon demand, and any holders of Certificates that have not theretofore  
complied with the terms of the Merger Agreement will thereafter (subject to     
the terms of the Merger Agreement, abandoned property, escheat and other        
similar laws) look only to Parent, and only as general creditors thereof, for   
payment of their claim for any Merger Consideration.                            

None of Parent, Sub, the Surviving Corporation or the Paying Agent will be  
liable to any person in respect of any payments or distributions payable from   
the Payment Fund delivered to a public official pursuant to any applicable      
abandoned property, escheat or similar law. If any Certificates will not have   
been surrendered prior to                                                       

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the time which any Merger Consideration in respect of such Certificate would    
otherwise escheat to or become the property of any governmental entity, any     
amounts payable in respect of such certificate will, to the extent permitted    
by applicable law, become the property of the Surviving Corporation, free and   
clear of all claims or interest of any person previously entitled thereto.      

Parent will be entitled to deduct and withhold from the consideration       
otherwise payable pursuant to the Merger Agreement to any holder of Shares,     
Options or Certificates such amounts as Parent is required to deduct and        
withhold with respect to the making of such payment under the Internal Revenue  
Code of 1986, as amended (the "Code"), or any provision of applicable state,    
local or foreign tax law. To the extent that amounts are so withheld by         
Parent, such withheld amounts will be treated for all purposes of the Merger    
Agreement as having been paid to such holders in respect of which such          
deduction and withholding was made by Parent. (SECTION 3.1)                     

DISSENTING SHARES                                                               

The Merger Agreement provides that Shares issued and outstanding immediately
prior to the Effective Time and held by a stockholder (if any) who has not      
voted in favor of the Merger or consented thereto in writing and who has the    
right to and has properly delivered a demand for appraisal in accordance with   
Section 262 of the DGCL (or any successor provision) will not be converted      
into the right to receive the Merger Consideration unless such holder fails to  
perfect or otherwise loses such holder's right to such appraisal, if any. See   
"STOCKHOLDERS' RIGHTS OF APPRAISAL." The Merger Agreement further provides      
that, if after the Effective Time, any such stockholder fails to perfect or     
loses any such right to appraisal, such Dissenting Shares will be treated as    
if they had been converted as of the Effective Time into the right to receive   
the Merger Consideration in accordance with terms of the Merger Agreement.      
Notwithstanding anything to the contrary contained herein, if the Merger is     
rescinded or abandoned, then the right of any holder to be paid the fair value  
of such holder's Dissenting Shares will cease. The Company has agreed in the    
Merger Agreement to give Parent prompt notice of any demands for appraisal      
received by the Company and any withdrawal of such demands, and Parent will     
have the right to participate in and direct all negotiations and proceedings    
with respect to such demands. The Company will not, except with the prior       
written consent of Parent, make any payment with respect to, or offer to        
settle or settle, any such demands. (SECTION 2.1)                               

CERTAIN REPRESENTATIONS AND WARRANTIES                                          

The Company. Pursuant to the Merger Agreement, the Company has made         
representations and warranties to Parent and Sub regarding, among other         
things, (i) the Company's organization, standing and power, (ii) the Company's  
capital structure, (iii) the Company's authority and noncontravention, (iv)     
certain filings with the SEC, (v) the accuracy of information contained in      
this Proxy Statement and certain other SEC filings relating to the              
transactions contemplated by the Merger Agreement, (vi) the absence of certain  
changes or events and the absence of undisclosed material liabilities, (vii)    
collective bargaining, employment agreements and labor matters, (viii)          
employee benefits matters, (ix) taxes, (x) the required vote of the Company's   
stockholders in connection with approval of the Merger Agreement and the        
transactions contemplated thereby, (xi) the Company's compliance with           
applicable laws, (xii) opinions of Lehman Brothers and Chase, (xiii) brokers,   
(xiv) litigation, (xv) material contracts, (xvi) unlawful payments and          
contributions, (xvii) real property, (xviii) the absence of an anti-takeover    
plan and the inapplicability of state takeover statutes to the Merger and the   
Merger Agreement, (xix) insurance, (xx) affiliate transactions and (xxi) the    
disclosure schedules of the Merger Agreement. (SECTION 4.1)                     

Parent and Sub. Pursuant to the Merger Agreement, Parent and Sub have made  
representations and warranties to the Company regarding, among other things,    
(i) Parent's and Sub's organization, standing and power, (ii) Parent's and      
Sub's authority and noncontravention, (iii) the accuracy of information         
supplied by Parent and Sub, contained in this Proxy Statement and certain       
other SEC filings relating to the transactions contemplated by the Merger       
Agreement, (iv) the ownership structure and purpose of Sub and (v) brokers.     
(SECTION 4.2)                                                                   

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CONDUCT OF BUSINESS PENDING THE CLOSING                                         

The Merger Agreement provides that, except as previously disclosed by the   
Company in the disclosure schedules to the Merger Agreement to Parent and Sub,  
or as expressly contemplated by the Merger Agreement, during the period from    
the date of the Merger Agreement to the Effective Time, the Company will, and   
will cause its Subsidiaries to, act and carry on their respective businesses    
(including businesses conducted through the Company's joint ventures) in the    
ordinary course of business consistent with past practice and use their         
reasonable best efforts to preserve intact their current business               
organizations (and the Company's joint ventures), keep available the services   
of their current key officers and employees and preserve the goodwill of those  
engaged in material business relationships with them, and to that end, without  
limiting the generality of the foregoing, except as expressly contemplated by   
the Merger Agreement, the Company will not, and, except as previously           
disclosed by the Company in the disclosure schedules to the Merger Agreement    
to Parent and Sub (subject, only where expressly stated therein, to the         
consent of Parent), will not permit any of its Subsidiaries to, without the     
prior written consent of Parent:                                                

(a) (i) except for a direct or indirect wholly-owned Subsidiary of the  
Company, declare, set aside or pay any dividends on, or make any other      
distributions (whether in cash, stock or property) in respect of, any       
outstanding capital stock, (ii) split, combine or reclassify any of its     
outstanding capital stock or issue or authorize the issuance of any other   
securities in respect of, in lieu of or in substitution for shares of its   
outstanding capital stock, or (iii) purchase, redeem or otherwise acquire   
any shares of outstanding capital stock or any rights, warrants or options  
to acquire any such shares;                                                 

(b) issue, sell, grant, pledge or otherwise encumber any shares of its  
capital stock, any other voting securities or any securities convertible    
into or exchangeable for, or any rights, warrants or options to acquire,    
any such shares, voting securities or convertible or exchangeable           
securities, other than upon the exercise of Options outstanding on the date 
of the Merger Agreement and except for automatic grants of options to       
directors of the Company under the Stock Option Plan;                       

(c) amend its certificate of incorporation, bylaws or other comparable  
charter or organizational documents;                                        

(d) directly or indirectly acquire, make any investment in, or make any 
capital contributions to, any person (other than any wholly-owned           
Subsidiary) or except in the ordinary course of business consistent with    
past practice, acquire, lease or agree to manage any assets or properties;  

 (e) directly or indirectly sell, lease, mortgage or otherwise encumber or
subject to any lien or otherwise dispose of any of its properties or assets 
(including stock or other ownership interests in any properties or          
Subsidiaries), other than in the ordinary course of business consistent     
with past practice, except for the sale of (i) the stock of Chartwell       
Mexico Corp. or (ii) the Company's interest in Grupo Chartwell de Mexico,   
S.A. de C.V.;                                                               

(f) purchase or sell any real property or other material asset or enter 
into any agreement to purchase or sell the same;                            

(g) modify the terms of, terminate or fail in any material respect to   
comply with the terms of any lease, franchise agreement or joint venture    
agreement, or enter into any new lease, franchise agreement or joint        
venture agreement;                                                          

 (h) undertake any material construction or alteration with respect to any
Asset;                                                                      

(i) (i) incur any indebtedness for borrowed money or guarantee any such 
indebtedness of another person, other than indebtedness owing to or         
guarantees of indebtedness owing to the Company or any Subsidiary of the    
Company, (ii) issue or sell any debt securities or warrants or other rights 
to acquire debt securities or (iii) make any loans or advances to any other 
person, other than to the Company or to any direct or indirect wholly-owned 
Subsidiary of the Company and other than routine advances to employees      
consistent with past practice, and except, in the case of clause (i), for   
borrowings under existing credit facilities in the ordinary course of       
business;                                                                   

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(j) make any tax election or settle or compromise any income tax        
liability of the Company or of any of its Subsidiaries. The Company will,   
before filing or causing to be filed any tax return of the Company or any   
of its Subsidiaries, consult with and obtain the approval of Parent and its 
advisors as to the positions and elections that may be taken or made with   
respect to such return;                                                     

(k) pay, discharge, settle or satisfy any claims, liabilities or        
obligations (absolute, accrued, asserted or unasserted, contingent or       
otherwise), other than the payment, discharge or satisfaction, (i) in the   
ordinary course of business consistent with past practice or in accordance  
with their terms, of liabilities reflected or reserved against in, or       
contemplated by, the most recent consolidated financial statements (or the  
notes thereto) of the Company included in the required reports, schedules,  
forms, statements and other documents filed by the Company with the         
Commission since January 1, 1996 filed and publicly available prior to the  
date of this Merger Agreement or incurred since the date of such financial  
statements in the ordinary course of business consistent with past practice 
or (ii) the repayment of outstanding indebtedness under the Company's       
existing credit facilities;                                                 

(l) grant or agree to grant to any employee any increase in wages or    
bonus, severance, profit sharing, retirement, deferred compensation,        
insurance or other compensation or benefits, or establish any new           
compensation or benefit plans or arrangements, or amend or agree to amend   
any of the Company's existing employee benefit plans, except for stay,      
severance and other bonus payments, and as may be required under existing   
agreements (including collective bargaining agreements) or normal,          
regularly scheduled increases in nonofficer employees consistent with past  
practices or as required by law such that all severance, bonus or stay      
payments, together with severance payments will not exceed $1,000,000 in    
the aggregate;                                                              

(m) other than in the ordinary course of business consistent with past  
practice or as otherwise expressly permitted by the Merger Agreement, enter 
into or amend any employment, consulting, severance or similar agreement;   

 (n) waive any claims or rights other than in the ordinary course of doing
business so long as such claims or rights do not either (i) have a value in 
excess of $500,000 in the aggregate or (ii) are with respect to affiliates  
of the Company;                                                             

 (o) make any change in any method of accounting or accounting practice or
policy except as required by any changes in GAAP;                           

(p) incur, enter into, amend, modify or terminate any material          
commitment, contract or agreement (including with respect to any management 
agreements, leases, capital expenditures or purchases of assets);           

 (q) adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization or   
any agreement relating to an Acquisition Transaction Proposal (as           
hereinafter defined) (other than as expressly permitted by the Merger       
Agreement);                                                                 

(r) engage in any transaction with, or enter into any agreement,        
arrangement, or understanding with, or amend, modify or terminate any       
agreement, arrangement or understanding with, directly or indirectly, any   
of the Company's affiliates, officers or directors, including, without      
limitation, any transactions, agreements, arrangements or understandings    
with any affiliate, officer or director or other person covered under Item  
404 of Regulation S-K under the Securities Act that would be required to be 
disclosed under such Item 404, other than pursuant to such agreements,      
arrangements, or understandings existing on the date of the Merger          
Agreement and as previously disclosed by the Company in the disclosure      
schedules to the Merger Agreement to Parent and Sub, other than the sale of 
the Mexican Joint Venture;                                                  

(s) close, shut down, or otherwise eliminate any of the Company's hotel 
properties; or                                                              

(t) authorize any of, or commit or agree to take any of, the foregoing  
actions. (Section 5.1)                                                      

NO SOLICITATION OF PROPOSALS                                                    

Unless the Merger Agreement is terminated in accordance with the terms      
thereof, the Merger Agreement prohibits the Company, its Subsidiaries, any of   
their respective officers, directors, employees, representatives, agents or     
affiliates (including, without limitation, any investment banker, attorney or   
accountant retained by the                                                      

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Company or any of its Subsidiaries), from, directly or indirectly, initiating,  
soliciting or encouraging (including by way of furnishing non-public            
information), or entering into, or maintaining or continuing discussions or     
negotiating with any person in furtherance of, an Acquisition Transaction (as   
defined below); provided, however, that nothing in the Merger Agreement will    
prohibit the Board from furnishing information to, or entering into             
discussions or negotiations with, any person (other than an affiliate of the    
Company) that makes an unsolicited written proposal for an Acquisition          
Transaction Proposal after the date hereof, if the Board, after consultation    
with and based upon the advice of outside legal counsel, determines in good     
faith that the failure to engage in such negotiations or discussions, or        
disclose such non-public information, would be reasonably expected to be a      
breach of, or would be inconsistent with, the fiduciary duties of the Board of  
the Company under applicable law, and prior to taking such action, the Company  
provides written notice to Parent within 24 hours of receipt of any such        
proposal to the effect that it is taking such action (which notice will         
identify the nature and material terms of the proposal and the person or        
persons making the same). The Company will promptly deliver to Parent a copy    
of any Acquisition Transaction Proposal and promptly notify Parent of any       
indication that any person is considering making an Acquisition Transaction     
Proposal or of any request for non-public information relating to the Company   
or its Subsidiaries or for access to the properties, books or records of the    
Company or any of its Subsidiaries, by any person that may be considering       
making, or has made, an Acquisition Transaction Proposal and will keep Parent   
fully and timely informed of the status of the same. For purposes of this       
Proxy, "Acquisition Transaction" means a transaction involving any of the       
following (other than the transactions contemplated by the Merger Agreement     
with Parent or Sub) involving the Company or any of its Subsidiaries: (v) any   
direct or indirect acquisition or purchase of more than 10% of any class of     
equity securities of the Company; (w) any merger, consolidation, share          
exchange, recapitalization, business combination or other similar transaction;  
(x) any sale, lease, exchange, mortgage, pledge, transfer or other disposition  
of any assets (other than immaterial assets) of the Company or any of its       
Subsidiaries in a single transaction or series of related transactions; or (y)  
any tender offer or exchange offer for 25 percent or more of the outstanding    
shares of capital stock of the Company. An "Acquisition Transaction Proposal"   
means any offer or proposal for, or any indication of interest in, an           
Acquisition Transaction. This paragraph does not prohibit the Company from      
taking and disclosing to its stockholders a position contemplated by Rules      
14d-9 and 14e-2(a) promulgated under the Exchange Act or from making any        
disclosure to the Company's stockholders or making such disclosure as, in each  
case, may be required under applicable law; provided that the Company will not  
withdraw or modify, or propose to withdraw or modify, its position with         
respect to the Merger or approve or recommend, or propose to approve or         
recommend, an Acquisition Transaction Proposal except as expressly permitted    
above. The Company agrees not to, in connection with an Acquisition             
Transaction Proposal, (x) furnish any information to any third party unless     
such third party signs a confidentiality agreement no less favorable to the     
Company than the confidentiality agreements signed by affiliates of Parent and  
(y) release any third party from, or waive any provision of, any                
confidentiality or standstill agreement to which the Company is a party,        
unless the Board has determined in good faith, after consultation with and      
based upon the advice of outside legal counsel, that failing to release such    
third party or waive such provisions would be reasonably expected to be a       
breach of, or would be inconsistent with, the fiduciary duties of the Board of  
the Company under applicable law. (SECTION 6.7)                                 

DIRECTORS' AND OFFICERS' INSURANCE AND INDEMNIFICATION                          

The Merger Agreement provides that the certificate of incorporation and by- 
laws of the Surviving Corporation will contain the provisions with respect to   
indemnification set forth in the certificate of incorporation and by-laws of    
the Company on the date of the Merger Agreement, which provisions will not be   
amended, repealed or otherwise modified for a period of six years after the     
Effective Time in any manner that would adversely affect the rights thereunder  
of individuals who at any time prior to the Effective Time were directors or    
officers of the Company in respect of actions or omissions occurring at or      
prior to the Effective Time (including, without limitation, the transactions    
contemplated by the Merger Agreement), unless such modification is required by  
law.                                                                            

The Company will, and from and after the Effective Time, Parent and the     
Surviving Corporation will, indemnify, defend and hold harmless each person     
who is now, or has been at any time prior to the date hereof or                 

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who becomes prior to the Effective Time, an officer or director of the Company  
(the "Indemnified Parties") against all losses, claims, damages, costs,         
expenses (including reasonable attorneys' fees and expenses), liabilities or    
judgments or amounts that are paid in settlement with the approval of the       
indemnifying party of or in connection with any threatened or actual claim,     
action, suit, proceeding or investigation based on or arising out of the fact   
that such person is or was a director or officer of the Company whether         
pertaining to any matter existing or occurring at or prior to the Effective     
Time and whether asserted or claimed prior to, or at or after, the Effective    
Time ("Indemnified Liabilities"), including all Indemnified Liabilities based   
on, or arising out of, or pertaining to the Merger Agreement or the             
transactions contemplated hereby, in each case, to the full extent a            
corporation is permitted under the DGCL to indemnify its own directors or       
officers (and Parent and the Surviving Corporation, as the case may be, will    
pay expenses in advance of the final disposition of any such action or          
proceeding to each Indemnified Party to the full extent permitted by law,       
subject to the receipt of an undertaking contemplated by Section 145(e) of the  
DGCL to refund such advances if it is determined that the Indemnified Party     
was not entitled thereto).                                                      

Without limiting the foregoing, the Merger Agreement provides that in the   
event any such claim, action, suit, proceeding or investigation is brought      
against any Indemnified Parties (whether arising before or after the Effective  
Time), (i) the Indemnified Parties may retain counsel satisfactory to them and  
the Company (or them and Parent and the Surviving Corporation after the         
Effective Time) and the Company (or after the Effective Time, Parent and the    
Surviving Corporation) will pay all fees and expenses of such counsel for the   
Indemnified Parties promptly as statements therefor are received; and (ii) the  
Company (or after the Effective Time, Parent and the Surviving Corporation)     
will use all reasonable efforts to assist in the vigorous defense of any such   
matter; provided that neither the Company, Parent nor the Surviving             
Corporation will be liable for any settlement effected without its prior        
written consent. Any Indemnified Party wishing to claim indemnification under   
the Merger Agreement, upon learning of any such claim, action, suit,            
proceeding or investigation, will notify the Company (or after the Effective    
Time, Parent and the Surviving Corporation) (but the failure so to notify will  
not relieve a party from any liability which it may have under the Merger       
Agreement except to the extent such failure prejudices such party), and will    
deliver to the Company (or after the Effective Time, Parent and the Surviving   
Corporation) the undertaking contemplated by Section 145(e) of the DGCL. The    
Indemnified Parties as a group may retain only one law firm to represent them   
with respect to each such matter unless there is, under applicable standards    
of professional conduct, a conflict on any significant issue between the        
positions of any two or more Indemnified Parties. The Company, Parent and Sub   
agree that all rights to indemnification, including provisions relating to      
advances of expenses incurred in defense of any action or suit, existing in     
favor of the Indemnified Parties with respect to matters occurring through the  
Effective Time, will survive the Merger and continue in full force and effect   
for a period of not less than six years from the Effective Time; provided,      
however, that all rights to indemnification in respect of any Indemnified       
Liabilities asserted or made within such period will continue until the         
disposition of such Indemnified Liabilities.                                    

For a period of three years after the Effective Time, Parent will cause the 
Surviving Corporation to maintain in effect the current policies of directors'  
and officers' liability insurance maintained by the Company (provided that      
Parent may substitute therefor policies of at least the same coverage and       
amounts containing terms and conditions that are no less advantageous in any    
material respect to the Indemnified Parties) with respect to matters arising    
before the Effective Time; provided, that Parent will only be obligated to      
maintain such insurance in such scope and amount as is available at annual      
premiums during such period not in excess of 150% of the per annum rate of the  
aggregate annual premium currently paid by the Company for such insurance on    
the date of the Merger Agreement.                                               

The foregoing provisions are intended to be for the benefit of, and will be 
enforceable by, each Indemnified Party, his or her heirs and his or her         
personal representatives and will be binding on all successors and assigns of   
Parent, Sub, the Company and the Surviving Corporation. (SECTION 6.5)           

CERTAIN OTHER COVENANTS                                                         

Parent Payment and Related Matters. Notwithstanding anything in the Merger  
Agreement to the contrary, at or prior to the Closing, the Company may make     
any of the payments set forth under "sources and                                

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uses" in the written disclosure schedules previously delivered by the Company   
to Parent and Sub. Immediately prior to the Effective Time (so long as the      
conditions to Closing set forth in the Merger Agreement have been satisfied or  
waived), Parent or Sub will deliver or cause to be delivered to the Company     
cash, by wire transfer of immediately available funds, in an amount equal to    
the amount of the then outstanding indebtedness owed under the Credit Facility  
(as hereinafter defined) after giving effect to amounts, if any, paid to the    
administration agent by or on behalf of Parent and Sub immediately prior to     
the Effective Time in satisfaction of indebtedness owed under the Credit        
Facility, but in no event more than the sum of (i) $25,976,000; plus (ii)       
$3,200,000, but only if the sale of the real property located at 28 SouthWest   
Freeway, Houston, Texas has not occurred; plus (iii) $1,800,000, but only if    
the sale of the real property located at SWC 202 Freeway and 44th Street,       
Phoenix, Arizona has not occurred; plus (iv) amounts expended by the Company    
with respect to the extraordinary capital expenditures, or other extraordinary  
expenditures, in each case, as previously disclosed by the Company in the       
disclosure schedules to the Merger Agreement to Parent and Sub; plus (v)        
$2,500,000.00, plus (vi) (to the extent it is a positive number) or minus the   
absolute value of (to the extent it is a negative number), the Hedge Amount     
(as defined below) minus cash on hand, if any, of the Company at the Effective  
Time. In addition, at the Effective Time, Parent will, or will cause the        
Surviving Corporation to pay the Option Consideration on behalf of the          
Company. For purposes of the Merger Agreement, the term "Hedge Amount" means    
the amount determined by subtracting (x) $64,392,867 from (y) the U.S. dollar   
equivalent (determined immediately prior to the Effective Time) of 91 million   
Canadian dollars (based on the most recent exchange rate appearing on Reuters   
Screen page FWEC available immediately prior to the Effective Time). (SECTION   
6.12)                                                                           

Access to Information; Confidentiality. The Merger Agreement provides that  
the Company will, and will cause each of its Subsidiaries to, afford to Parent  
and to Parent's officers, employees, counsel, financial advisors and other      
representatives reasonable access during normal business hours during the       
period prior to the Effective Time to all its owned and leased properties       
(including as required to perform any environmental studies or reviews of such  
properties), books, contracts, commitments, tax returns, personnel and records  
and, during such period, the Company will, and will cause each of its           
Subsidiaries to, furnish as promptly as practicable to Parent, its counsel,     
financial advisors and other representatives, such information concerning its   
business, properties, financial condition, operations and personnel as Parent   
may from time to time reasonably request. Any such access or investigation      
will not affect the representations or warranties made by the Company           
contained in the Merger Agreement. Except as required by law, Parent and the    
Company will hold, and will cause their respective directors, officers,         
partners, employees, accountants, counsel, financial advisors and other         
representatives and affiliates to hold, any non-public information obtained     
from the other party in confidence in accordance with the Confidentiality       
Agreement, dated August 14, 1997, by and between the Company and Parent.        
(SECTION 6.3)                                                                   

Reasonable Best Efforts. Upon the terms and subject to the conditions and   
other agreements set forth in the Merger Agreement, each of the parties         
thereto agrees to use its reasonable best efforts to take, or cause to be       
taken, all actions, and to do, or cause to be done, and to assist and           
cooperate with the other parties in doing, all things necessary, proper or      
advisable to consummate and make effective, in the most expeditious manner      
practicable, the Merger and the other transactions contemplated by the Merger   
Agreement, including the satisfaction of the respective conditions set forth    
in the Merger Agreement; provided, however, that nothing in the Merger          
Agreement will obligate the Company or its Subsidiaries to sell, transfer or    
otherwise dispose of any of their respective assets to cause a termination of   
the waiting period under the HSR Act or the Canadian Acts. (SECTION 6.4)        

Consents, Approvals and Filings. The Company and Parent will make and cause 
their respective Subsidiaries to make all necessary filings, as soon as         
practicable, including, without limitation, those required under the HSR Act,   
the Canadian Acts and the Exchange Act in order to facilitate prompt            
consummation of the Merger and the other transactions contemplated by the       
Merger Agreement. In addition, the Company and Parent will each use their       
reasonable best efforts, and will cooperate fully with each other (i) to        
comply as promptly as practicable with all governmental requirements            
applicable to the Merger and the other transactions contemplated by the Merger  
Agreement; (ii) to obtain as promptly as practicable all necessary permits,     
orders or other consents of governmental entities and consents of all third     
parties necessary for the consummation of the Merger and the                    

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other transactions contemplated by the Merger Agreement; and (iii) to cause a   
termination of the waiting period under the HSR Act and Canadian Acts without   
the entry by a court of competent jurisdiction of an order enjoining the        
consummation of the transactions contemplated thereby at as early a date as     
possible. Each of the Company and Parent will use reasonable efforts to         
provide such information and communications to governmental entities as such    
governmental entities may reasonably request.                                   

Each of the parties thereto will provide to the other party copies of all   
applications in advance of filing or submission of such applications to         
governmental entities in connection with the Merger Agreement, and copies of    
all correspondence with such governmental entities, and will keep all the       
parties timely apprised of the status of the foregoing. (SECTION 6.8)           

Public Announcements. The Merger Agreement also provides that Parent and    
Sub, on the one hand, and the Company, on the other hand, will consult with     
each other before issuing, and provide each other the opportunity to review     
and comment upon, any press release, Commission filing or other public          
statements with respect to the transactions contemplated by the Merger          
Agreement, including the Merger, and will not issue any such press release or   
make any such public statement prior to such consultation, except as may be     
required by applicable law, court process or by obligations pursuant to any     
listing agreement with any national securities exchange or automated quotation  
system. (SECTION 6.6)                                                           

Name Changes. At or promptly after the Effective Time, the Merger Agreement 
provides that Parent and Sub will change the name of the Company, and such      
name will not contain the word or words "Chartwell" or "Chartwell Leisure," or  
any derivative thereof and neither the Surviving Corporation nor any            
Subsidiary may use any such name in any manner in the future. (SECTION 6.10)    

Tax Filings. Pursuant to the Merger Agreement, Parent will be responsible   
for preparing and will file all Tax Returns for taxable periods ending prior    
to the Effective Date which are required to be filed by the Company and its     
Subsidiaries after the Effective Date. (SECTION 6.13)                           

Investment Canada Act. The Merger Agreement provides that the Company agrees
that it will cause its Subsidiaries in Canada to cease to engage in any         
publication, distribution, or sale of any books, magazines, periodicals or      
newspapers in print or machine readable form, and will cease to engage in any   
production, distribution, sale, exhibition or rental of any film recordings or  
video recordings, not later than three (3) days prior to Closing. (SECTION      
6.14)                                                                           

CONDITIONS TO CONSUMMATION OF THE MERGER                                        

The Company, Parent and Sub. The Merger Agreement provides that the         
obligation of each party to the Merger Agreement to effect the Merger is        
subject to the satisfaction or written waiver on or prior to the Closing Date   
of the following conditions: (i) the Merger Agreement and the Merger will have  
been approved and adopted by the affirmative vote of the requisite number of    
stockholders of the Company, and in the manner as will be required pursuant to  
the Company's certificate of incorporation, by-laws and the DGCL; (ii) no       
statute, rule, regulation, temporary restraining order, preliminary or          
permanent injunction or other order issued by any court of competent            
jurisdiction or other legal restraint or prohibition preventing the             
consummation of the Merger will be in effect; provided, however, that the       
party invoking this condition will use its best efforts to have any such        
temporary restraining order, injunction, order, restraint or prohibition        
vacated; (iii) all material filings required to be made prior to the Effective  
Time with, and all material consents, approvals, permits and authorizations     
required to be obtained prior to the Effective Time from, governmental          
entities, including, without limitation, those previously disclosed by the      
Company in the disclosure schedules to the Merger Agreement to Parent and Sub,  
in connection with the execution and delivery of the Merger Agreement and the   
consummation of the transactions contemplated thereby by the Company, Parent    
and Sub will have been made or obtained (as the case may be); and (iv) the      
waiting periods (and any extension thereof) applicable to the Merger under the  
HSR Act and the Canadian Acts (as hereinafter defined) will have been           
terminated or will have otherwise expired. (SECTION 7.1)                        

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The Company. The obligation of the Company to effect the Merger is further  
subject to the satisfaction or written waiver on or prior to the Closing Date   
of the following conditions: (i) the representations and warranties of Parent   
and Sub set forth in the Merger Agreement that are qualified as to materiality  
or Parent Material Adverse Effect (as defined below) will be true and correct   
and the representations and warranties of Parent and Sub set forth in the       
Merger Agreement that are not so qualified will be true and correct in all      
material respects, in each case as of the date of the Merger Agreement and as   
of the Closing Date as though made on and as of the Closing Date. In addition,  
all such representations and warranties will be true and correct as of the      
date of the Merger Agreement and as though made on and as of the Closing Date,  
except to the extent such representation or warranty speaks of an earlier date  
(without regard to any qualifications for materiality or Parent Material        
Adverse Effect) except to the extent that any such failure to be true and       
correct (other than any such failure the effect of which is immaterial)         
individually and in the aggregate with all such other failures would not have   
a Parent Material Adverse Effect, and the Company will have received a          
certificate signed on behalf of Parent by the General Partner of Parent to the  
effect set forth in this paragraph; (ii) Parent and Sub will have performed in  
all material respects all obligations required to be performed by them under    
the Merger Agreement at or prior to the Closing Date, and the Company will      
have received a certificate signed on behalf of Parent by the General Partner   
of Parent to such effect; (iii) all indebtedness owed by the Company under the  
Credit Facility will have been repaid in full, and such Credit Agreement,       
dated August 28, 1996 (the "Credit Facility"), among the Company, Chartwell     
Canada Corp., Various Banks, The Bank of Nova Scotia, as syndication agent,     
and Chase Manhattan, as administration agent, will have been terminated; (iv)   
the Company will have received from Parent the payments referenced above under  
the heading "Parent Payment and Related Matters"; and (v) neither Lehman        
Brothers nor Chase will have withdrawn, revoked, amended or modified its        
fairness opinion in any material respect prior to the mailing by the Company    
of this Proxy Statement to its stockholders. For purposes of the Merger         
Agreement, "Parent Material Adverse Effect" means any change or effect that is  
or is reasonably expected to be materially adverse to the condition (financial  
or otherwise), business, assets or results of operations, of the Parent and     
its Subsidiaries taken as a whole or adversely affects the ability of the       
Parent to consummate the transactions contemplated by the Merger Agreement in   
any material respect or materially impairs or delays the Parent's ability to    
perform its obligations thereunder. (SECTION 7.3)                               

Parent and Sub. The obligations of Parent and Sub to effect the Merger are  
further subject to the satisfaction or written waiver on or prior to the        
Closing Date of the following conditions: (i) the representations and           
warranties of the Company set forth in the Merger Agreement that are qualified  
as to materiality or Company Material Adverse Effect (as defined below) will    
be true and correct and the representations and warranties of the Company set   
forth in the Merger Agreement that are not so qualified will be true and        
correct in all material respects, in each case as of the date of the Merger     
Agreement and as of the Closing Date as though made on and as of the Closing    
Date, except to the extent such representations and warranties speak as of an   
earlier date. For purposes of the Merger Agreement, "Company Material Adverse   
Effect" means any event that has had or would reasonably be expected to have a  
material adverse effect on the business, financial condition or results of      
operations of the Company and its Subsidiaries taken as a whole, or any change  
or effect that adversely, or is reasonably expected to adversely, affect the    
ability of the Company to consummate the transactions contemplated by the       
Merger Agreement in any material respect or materially impairs or delays the    
Company's ability to perform its obligations thereunder; provided, that (i)     
only for purposes of the Company's representations and warranties as to         
compliance with applicable laws and real property; and (ii) with respect to     
the conditions to the obligations of Parent and Sub to effect the Merger, as    
to (a) the truth and correctness of the representations and warranties of the   
Company set forth in the Merger Agreement and (B) there having not been, since  
September 30, 1997, any changes or events which, individually or in the         
aggregate, have had or reasonably would be expected to have a Company Material  
Adverse Effect. Company Material Adverse Effect will also include a material    
adverse effect with respect to (i) the assets and businesses of the Company     
and its Subsidiaries located in Canada, taken as a whole, and (ii) the assets   
and businesses of the Company and its Subsidiaries related to full service      
properties located in the United States, taken as a whole.                      

In addition, (i) all such representations and warranties of the Company will
be true and correct as of the date hereof and as though made on and as of the   
Closing Date, except to the extent such representation or                       

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warranty speaks of an earlier date (without regard to any qualifications for    
materiality or Company Material Adverse Effect) except to the extent that any   
such failure to be true and correct (other than any such failure the effect of  
which is immaterial) individually and in the aggregate with all such other      
failures would not have a Company Material Adverse Effect, and Parent will      
have received a certificate signed on behalf of the Company by the chief        
executive officer and the chief financial officer of the Company to the effect  
set forth in this paragraph; (ii) the Company will have performed in all        
material respects all obligations required to be performed by it under the      
Merger Agreement at or prior to the Closing Date, and Parent will have          
received a certificate signed on behalf of the Company by the chief executive   
officer and the chief financial officer of the Company to such effect; (iii)    
the number of Dissenting Shares will constitute no greater than 5% of the       
total number of Shares outstanding immediately prior to the Effective Time;     
(iv) the Company will have sold the Mexican Joint Venture for a purchase price  
in cash of not less than all amounts expended or accrued by the Company and     
its Subsidiaries in connection with or related to the Mexican Joint Venture,    
which amount will in no event be less than $3,750,000, and the Company will     
have no further obligations or liabilities with respect to its investment in    
the Mexican Joint Venture; (v) except as previously disclosed by the Company    
in the disclosure schedules to the Merger Agreement to Parent and Sub, at the   
Effective Time after giving effect to (a) the payment by the Company of all     
fees and expenses related to the transactions contemplated by the Merger        
Agreement (including, without limitation, the payment of any real property      
transfer taxes) and (b) the payments by Parent contemplated under the heading   
"Parent Payment and Related Matters," and the application of such payment       
proceeds by the Company as described therein, all outstanding indebtedness of   
the Company and its Subsidiaries for borrowed money, capitalized lease          
obligations and similar obligations, other than the amounts owed to the         
Company or its Subsidiaries and amounts previously disclosed by the Company in  
the disclosure schedules to the Merger Agreement to Parent and Sub, will, at    
the Effective Time, have been repaid in full and all liens with respect to      
such indebtedness will have been fully and effectively released and             
discharged, in each case without the incurrence by the Company or any           
Subsidiary or joint venture of the Company of any default or prepayment or      
other penalty, cost or charge other than repayment of the principal amount of   
such indebtedness together with accrued and unpaid interest thereon, and the    
Company will have received a customary payoff letter from Chase Manhattan or    
other authorized lender under the Credit Facility in respect of the             
indebtedness under the Credit Facility; (vi) since September 30, 1997, there    
will not have been any changes or events which, individually or in the          
aggregate, have had or reasonably would be expected to have a Company Material  
Adverse Effect; (vii) all consents of third parties previously disclosed by     
the Company in the disclosure schedules to the Merger Agreement to Parent and   
Sub will have been obtained, including the consent or waiver of Travelodge      
Hotels, Inc., a subsidiary of Cendant ("Travelodge"), under the Master License  
Agreement for the Territory of the Dominion of Canada by and between            
Travelodge and Chartwell Canada Hospitality Corp., dated as of September 30,    
1996, evidencing its consent to the consummation of the Merger or waiving any   
Travelodge rights, if any, under such agreement relating to the consummation    
of the Merger, in form and substance reasonably acceptable to Parent; (viii)    
as of the Effective Time, the Second Amended and Restated Financing Agreement   
between Cendant and the Company, dated as of July 24, 1996, will have been      
terminated without the payment of any amounts by the Company or any of its      
Subsidiaries therefor; (ix) all legal, investment banking, accounting,          
advisory, consulting, and other third party professional, printing and          
Commission fees and expenses incurred, paid or accrued by the Company and its   
Subsidiaries in connection with the negotiation, execution and delivery of the  
Merger Agreement and the other documents contemplated hereby (including         
amounts payable to Bear Stearns, Chase and Lehman Brothers) will not exceed     
$7,000,000; (x) the Agreement of Lease between Fisher 40th 3rd Company and      
Hawaiian Realty, Inc., as landlord, and the Company, as tenant, dated February  
29, 1996 (the "New York Office Lease") will have terminated without the         
incurrence, payment or accrual by the Company and its Subsidiaries of any cash  
costs or expenses other than rent through the later of December 31, 1997 or     
the Effective Time on the terms set forth in the New York Office Lease; (xi)    
the Parent will have no reasonable basis to believe that the aggregate          
withdrawal liability of the Commonly Controlled Entities, if all Commonly       
Controlled Entities were to withdraw from all Multiemployer Plans as of the     
date hereof, would exceed $5,000,000; and (xii) the Company will have           
obtained, and delivered copies thereof to Parent, the consents of holders of    
Options. (SECTION 7.2)                                                          

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TERMINATION                                                                     

The Merger Agreement may be terminated and the transactions contemplated    
thereby may be abandoned at any time prior to the Effective Time,               
notwithstanding approval thereof by the stockholders of the Company in any one  
of the following circumstances:                                                 

(a) By the written mutual consent of Parent and the Company;            

(b) By Parent or the Company, if, without any material breach by such   
terminating party of its obligations under the Merger Agreement, the Merger 
has not occurred on or before May 15, 1998;                                 

(c) By Parent or the Company, if (x) any statute, rule or regulation has
been promulgated by any governmental entity prohibiting or restricting the  
Merger or (y) any federal or state court of competent jurisdiction or other 
governmental entity has issued an order, decree or ruling, or taken any     
other action permanently restraining, enjoining or otherwise prohibiting    
the Merger and such order, decree, ruling or other action has become final  
and non-appealable provided that a party may not terminate the Merger       
Agreement pursuant to this clause (iii) if it has not complied with its     
obligations under the headings "--Reasonable Best Efforts" and "--Consents, 
Approvals and Filings";                                                     

(d) By Parent or the Company if, upon a vote at a duly held Stockholders
Meeting or any adjournment thereof, any required approval of the            
stockholders of the Company has not been obtained;                          

(e) By the Company, if it has received an Acquisition Transaction       
Proposal (other than from an affiliate of the Company), and (A) the Board   
determines (i) in its good faith judgment that such Acquisition Transaction 
Proposal represents a more favorable financial alternative to the Company's 
stockholders than the Merger and (ii) after consultation with and based     
upon the advice of outside legal counsel, determines in good faith that     
failure to accept such Acquisition Transaction Proposal would be reasonably 
expected to be a breach of, or would be inconsistent with, the Board's      
fiduciary duties under applicable law, (B) the Company has complied with    
its obligations set forth under the heading "--No Solicitation Proposals"   
and has indicated in the notice delivered pursuant thereto that the Company 
intends to terminate the Merger Agreement, such notice having been received 
by Parent at least two (2) business days prior to any such termination and  
(C) during such two (2) business day-period the Company, together with its  
financial and legal advisors, will have considered any adjustment in the    
terms and conditions of the transactions contemplated hereby, including an  
increase in the Merger Consideration, that Parent may propose; provided     
that such termination pursuant to this clause (v) will not be effective     
until the Company has made payment of the $8,145,000 termination fee        
required by the Merger Agreement;                                           

 (f) By Parent, if the Board of the Company has (A) withdrawn, modified or
amended in any adverse respect its approval or recommendation of the Merger 
Agreement, the Merger or the transactions contemplated hereby, (B) failed   
to include in this Proxy Statement such recommendation, (C) endorsed or     
recommended to its stockholders an Acquisition Transaction Proposal, (D)    
resolved to do any of the foregoing or (E) if the Company has received a    
written Acquisition Transaction Proposal and has not rejected such          
Acquisition Transaction Proposal within ten (10) business days of its       
receipt thereof;                                                            

 (g) By Parent or the Company, if (A) the other party has failed to comply
in any material respect with any of the covenants and agreements (or in any 
respect with regard to covenants and agreements qualified by materiality)   
contained in the Merger Agreement to be complied with or performed by such  
party at or prior to such date of termination, and such failure continues   
for ten (10) business days after the actual receipt by such party of a      
written notice from the other party setting forth in detail the nature of   
such failure, or (B) a representation or warranty of the other party        
contained in the Merger Agreement will be untrue in any material respect or 
a representation or warranty qualified as to materiality or Company         
Material Adverse Effect or Parent Material Adverse Effect, as the case may  
be, will be untrue in any respect; and                                      

(h) By Parent, if any of the conditions to the obligations of Parent and
Sub to effect the Merger set forth in the Merger Agreement has become       
incapable of being fulfilled and has not been waived by Parent, or by the   
Company if any of the conditions to the obligations of the Company to       
effect the Merger set forth in the Merger Agreement has become incapable of 
being fulfilled and has not been waived by the Company.                     

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If the Merger Agreement or the transactions contemplated thereby are        
terminated:                                                                     

(i) By the Company, if it will have received an Acquisition         
Transaction Proposal (other than from an affiliate of the Company), and 
(A) the Company's Board determines (x) in its good faith judgment that  
such Acquisition Transaction Proposal represents a more favorable       
financial alternative to the Company's stockholders than the Merger and 
(y) after consultation with and based upon the advice of outside legal  
counsel, in good faith that failure to accept such Acquisition          
Transaction Proposal would be reasonably expected to be a breach of, or 
would be inconsistent with, the Board's fiduciary duties under          
applicable law, (B) the Company will have complied with its obligations 
set forth under the heading "--No Solicitation; Acquisition Transaction 
Proposals" in the Merger Agreement and have indicated in the notice     
delivered pursuant thereto that the Company intends to terminate this   
Agreement pursuant to this paragraph, such notice having been received  
by Parent at least two (2) business days prior to any such termination  
and (C) during such two (2) business-day period the Company, together   
with its financial and legal advisors, will have considered any         
adjustment in the terms and conditions of the transactions contemplated 
by the Merger Agreement, including an increase in the Merger            
Consideration, that Parent may propose; provided that such termination  
pursuant to this paragraph will not be effective until the Company has  
made payment of the full fee required by the Merger Agreement;          

(ii) By Parent, if the Board of the Company will have (A) withdrawn,
modified or amended in any adverse respect its approval or              
recommendation of the Merger Agreement, the Merger or the transactions  
contemplated thereby, (B) failed to include in the Proxy Statement such 
recommendation, (C) endorsed or recommended to its stockholders an      
Acquisition Transaction Proposal, (D) resolved to do any of the         
foregoing or (E) if the Company will have received a written            
Acquisition Transaction Proposal and will not have rejected such        
Acquisition Transaction Proposal within ten (10) business days of its   
receipt thereof; or                                                     

 (iii) By Parent or the Company if (x), at the time of the Meeting, an
Acquisition Transaction Proposal will have been pending or an           
Acquisition Transaction Proposal will have been previously announced,   
and (y), upon a vote of the stockholders at the Meeting or any          
adjournment thereof, any required approval of the stockholders of the   
Company with respect to the Merger will not have been obtained;         

then, (x) in the case of a termination of the Merger Agreement pursuant to  
clause (i) or (ii) above, the Company will pay Parent concurrently with     
such termination a fee of $8,145,000 (the "Fee"), which amount will be      
payable in immediately available funds, (y) in the case of a termination of 
the Merger Agreement as contemplated by clause (iii) above if within one    
year following the date of such termination of the Merger Agreement the     
applicable pending or previously announced Acquisition Transaction Proposal 
is consummated by the Company, then the Company will pay the Fee to Parent  
simultaneously with the consummation of such Acquisition Transaction        
Proposal or (z) in the case of a termination of the Merger Agreement as     
contemplated by clause (iii) above, if within one year following the date   
of such termination of the Merger Agreement any other Acquisition           
Transaction Proposal is consummated by the Company, then the Company will   
pay to Parent, simultaneously with the consummation of such other           
Acquisition Transaction Proposal, a fee equal to 3% of the aggregate amount 
of the consideration paid to the Company or its stockholders, as            
applicable, pursuant to such Acquisition Transaction Proposal. Following    
any payment of the Fee, the Company will have no further liability or       
obligation to Parent or Sub.                                                

If the Company does not consummate the Merger on or prior to May 15, 1998   
solely as a result of the failure of the closing condition in the Merger        
Agreement that neither Chase nor Lehman Brothers will have withdrawn, revoked,  
amended or modified its fairness opinion in any material respect prior to the   
mailing by the Company of this definitive Proxy Statement to its stockholders,  
then the Company will promptly pay to Parent a fee of $4,073,000, which amount  
will be payable in immediately available funds. (ARTICLE VIII)                  

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REGULATORY MATTERS  

Certain federal, state and foreign regulatory requirements must be complied 
with before the Merger is consummated. The Company and Parent are not aware of  
any other governmental consents or approvals that are required prior to the     
parties' consummation of the Merger other than those described below. It is     
presently contemplated that if such additional governmental consents and        
approvals are required, such consents and approvals will be sought. There can   
be no assurance, however, that any such additional consents or approvals will   
be obtained.                                                                    

HSR ACT                                                                         

The Merger is not subject to the requirements of the HSR Act and the rules  
and regulations thereunder, which provide that certain acquisition              
transactions may not be consummated until certain information has been          
furnished to the Antitrust Division of the Department of Justice and the        
Federal Trade Commission and until certain waiting periods have been            
terminated or have expired.                                                     

CANADIAN ACTS                                                                   

Pursuant to the Investment Canada Act, Parent is required to file a         
notification with respect to the transaction with the Canadian Department of    
Industry within thirty days following the Effective Time. This notification     
requirement is a statutory reporting requirement only and does not impose any   
further obligations or restrictions with respect to the Merger, the Merger      
Agreement, or the transactions contemplated thereby.                            

OTHER FOREIGN REGULATORY MATTERS                                                

The Company, directly or through subsidiaries, owns properties and conducts 
business operations in the United States, Canada and Mexico. In connection      
with the Merger, the laws of certain of these foreign countries, in addition    
to the Canadian Acts described above, may require the filing of information or  
documents with governmental authorities therein. The Company, Parent and Sub    
intend to comply with all relevant filing requirements of these jurisdictions.  
Parent and the Company do not expect that such foreign government approvals     
and notifications will affect the timing of or the ability to effect the        
consummation of the Merger; however, there can be no assurances with respect    
thereto.                                                                        

CERTAIN INFORMATION CONCERNING THE COMPANY  

THE COMPANY                                                                     

The Company is a hotel and motel owner, operator, developer and acquiror.   
The Company owns, directly or with joint venture partners, 123 hotel            
properties in both the full-service and limited-service segments, including     
approximately 10,900 guest rooms, located in 25 states and six Canadian         
provinces. In the full-service segment, the Company operates 29 hotels          
aggregating approximately 5,700 guest rooms. The Company's remaining 94         
hotels, consisting of approximately 5,200 rooms, operate in the limited-        
service segment, principally under the Travelodge(R) brand.                     

Additional information concerning the Company and its subsidiaries is       
contained in its Annual Report on Form 10-K for the year ended December 31,     
1996, its Quarterly Reports on Form 10-Q for the periods ended March 30, 1997,  
June 30, 1997 and September 30, 1997, its Proxy Statement dated March 28, 1997  
in connection with the annual meeting of the Company's stockholders held on     
May 1, 1997, its Current Reports on Form 8-K filed on July 2, 1997 and Forms    
8-K/A, dated February 7, 1997 and February 26, 1997, and its other public       
filings. See "AVAILABLE INFORMATION" and "INCORPORATION BY REFERENCE."          

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DIRECTORS AND EXECUTIVE OFFICERS                                                

Set forth below are the name, age, business address, present principal      
occupation or employment and five-year employment history of each director and  
executive officer of the Company. Unless otherwise indicated, the business      
address of each person listed below is Chartwell Leisure Inc., 605 Third        
Avenue, New York, New York 10158. Each named person is a citizen of the United  
States.                                                                         

Directors.                                                                    

RICHARD L. FISHER, age 56, has been Chairman of the Board and Chief         
Executive Officer of the Company since January 24, 1996, and a Director of the  
Company since December 20, 1995. Mr. Fisher has been self-employed, engaged in  
private investment activities, financial management and real estate ownership   
and development, among other businesses, since prior to 1990. Mr. Fisher is a   
principal of Fisher Brothers, one of the largest owners of commercial real      
estate in New York City. Mr. Fisher is a limited partner in CL Associates, the  
President, a director and a stockholder in the general partner of CL            
Associates and a partner in various affiliates of CL Associates. Mr. Fisher is  
also a member of the Board of Trustees of the University of Pennsylvania and    
the Horace Mann School located in Riverdale, New York, the Board of Lincoln     
Center for the Performing Arts and the National Advisory Board of The Chase     
Manhattan Bank. Arnold Fisher and Richard L. Fisher are first cousins.          

MARTIN L. EDELMAN, age 56, has been a Director of the Company since November
22, 1994 and President of the Company since January 24, 1996. Mr. Edelman was   
the Vice Chairman of the Board of the Company from December 1995 until March    
1996. He has also been a director of Cendant and a member of its Executive      
Committee since November 1993. Mr. Edelman has been of counsel to Battle        
Fowler LLP, a New York City law firm that provides services to the Company,     
since January 1994 and was a partner of that firm from 1972 through 1993. Mr.   
Edelman also serves as director of Avis Rent a Car, Inc. and Capital Trust.     
Mr. Edelman has also served as a consultant to the Fisher Brothers family, an   
affiliate of CL Associates since January 1995. Mr. Edelman is also a founding   
member of the Board of Directors of the Jackie Robinson Foundation.             

HENRY R. SILVERMAN, age 57, has been a Director of the Company since        
September 1994. Currently, he is the President and Chief Executive Officer of   
Cendant. He was Chairman of the Board, Chairman of the Executive Committee and  
Chief Executive Officer of HFS, a predecessor of Cendant, from May 1990 until   
December 1997 and was the Chairman of the Board and Chief Executive Officer of  
the Company from November 1994 until January 24, 1996. Mr. Silverman is a       
former General Partner of The Blackstone Group ("Blackstone"), a New York       
investment banking firm, having held such position from February 1990 to        
December 1991.                                                                  

STEPHEN P. HOLMES, age 41, has been a Director of the Company since November
1994. Mr. Holmes was Vice Chairman of Cendant from 1996 to December 1997, a     
Director of Cendant since June 1994 and was Executive Vice President and Chief  
Financial Officer of Cendant from July 1992 to July 1996 and was Executive      
Vice President, Chief Financial Officer and Treasurer of the Company from       
November 1994 until February 1996. Mr. Holmes was a director of AMRE, Inc., a   
home remodeling and improvement company. AMRE, Inc. filed for reorganization    
under Chapter 11 of the U.S. Bankruptcy Code in 1996. Mr. Holmes was employed   
by Blackstone from February 1990 through September 1991 as a Vice President     
and Managing Director.                                                          

MICHAEL J. KENNEDY, age 60, has been a Director of the Company since        
November 22, 1994. Mr. Kennedy has been an attorney with his own law firm in    
New York City since 1976. Mr. Kennedy also serves as a director of Avis Rent a  
Car, Inc.                                                                       

RACHEL ROBINSON, age 75, has been a Director of the Company since August 8, 
1996. Ms. Robinson has been the Chairperson of the Jackie Robinson Foundation,  
a charitable foundation that creates and administers scholarships for minority  
youth, since 1973.                                                              

MARC E. LELAND, age 58, has been a Director of the Company since December   
20, 1995. Mr. Leland has been President of Marc E. Leland & Associates,         
engaged in financial consulting and private investment activities, since 1984.  
Mr. Leland is a Vice President and director of CL Corp., the general partner    
of CL Associates, and a general partner in FGT, L.P., which is a limited        
partner of CL Associates. Mr. Leland was the Assistant Secretary                

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of the Treasury for International Affairs from 1981 to 1984. Mr. Leland is a    
director of Noble Drilling Corporation, a company that provides contract        
drilling services for the oil and gas industry worldwide.                       

DR. GUIDO GOLDMAN, age 60, has been a Director of the Company since August  
8, 1996. Dr. Goldman is a Manager of FSNL and a trustee of a trust and the      
beneficiary of another trust, both of which are members of FSNL. Dr. Goldman    
has been Chairman of the Board and President of First Spring Corporation,       
engaged in private asset management since 1985, and Director of the Program     
for the Study of Germany and Europe at the Minda de Gunzburg Center for         
European Studies of Harvard University since 1989 and the Director of the       
Minda de Gunzburg Center for European Studies from 1969 to 1994. See "SPECIAL   
FACTORS--Interests of Certain Persons in the Merger; Potential Conflicts of     
Interests."                                                                     

ARNOLD FISHER, age 64, has been a Director at the Company since March 20,   
1997. Mr. Fisher has been self-employed, engaged in private investment          
activities, financial management and real estate ownership and development,     
among other businesses, since prior to 1990. Mr. Fisher is a principal of       
Fisher Brothers, and has been a principal since prior to 1990. Mr. Fisher is a  
partner in CL Associates, a stockholder in the general partner of CL            
Associates, and a partner in various affiliates of CL Associates. Arnold        
Fisher and Richard L. Fisher are first cousins.                                 

Executive Officers. The following table sets forth certain information        
regarding the executive officers of the Company currently in office:            

                                                                · Download Table

  NAME                                     OFFICE OR POSITIONS HELD          
  ----                                     ------------------------          
                                                                             
Richard L. Fisher.............. Chairman of the Board and Chief Executive    
                                 Officer                                     
Martin L. Edelman.............. Director and President                       
Terrance E. Royer.............. Chief Operating Officer                      
Kenneth J. Weber............... Chief Financial Officer                      
Douglas H. Verner.............. Executive Vice President, General Counsel and
                                 Secretary                                   
Samuel Rosenberg............... Treasurer and Comptroller                    

For biographical information about Messrs. Fisher and Edelman, see "--      
Directors."                                                                     

TERRANCE E. ROYER, age 49, is currently the Chief Operating Officer of the  
Company and has held such office since March 1997. Mr. Royer is also currently  
the President and Chief Executive Officer of Royco Hotels & Resorts Ltd., a     
Calgary based hotel management and franchise company. Mr. Royer has held such   
office since 1992. In 1972 Mr. Royer co-founded The Relax Group of Companies,   
and was associated with such company until 1992. The Relax Group of Companies   
consisted of over 41 companies which were involved in the hospitality industry  
in North America. Mr. Royer is a member of the Advisory Committee of the        
Calgary Economic Development Authority and is a founding member of the          
Advisory Council for the Canadian Tourism Research Institute, which is          
affiliated with the Conference Board of Canada.                                 

KENNETH J. WEBER, age 51, is currently the Chief Financial Officer of the   
Company and has held such office since March 4, 1996. From September 1992       
until February 1996, Mr. Weber was the Senior Vice President and Chief          
Financial Officer of Omni Hotels, a company engaged in the ownership and        
management of hotels. From January 1987 until September 1992 he was the Senior  
Vice President and Chief Accounting Officer of Red Lion Hotels, a company       
engaged in the ownership and management of hotels. From 1973 to 1986, Mr.       
Weber held various positions in the hospitality industry. Mr. Weber currently   
serves on the Financial Officer Board of the American Hotel and Motel           
Association.                                                                    

DOUGLAS H. VERNER, age 43, is currently the Executive Vice President,       
General Counsel and Secretary of the Company and has held such offices since    
January 23, 1996. Mr. Verner was the Senior Vice President, General Counsel     
and Secretary of Forte Hotels from November 1984 until January 1996. He is      
also Chairman of the Copyright Committee of the American Hotel and Motel        
Association.                                                                    

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SAMUEL ROSENBERG, age 39, is currently the Treasurer and Comptroller for the
Company and has held such office since March 1996. From October 1986 until      
March 1996, Mr. Rosenberg was employed by Fisher Brothers and from 1992 until   
March 1996, Mr. Rosenberg was the Comptroller of Fisher Brothers.               

Each of the named executive officers has, since the formation of the Company
in November 1994, served in a managerial or executive capacity with the         
Company or its affiliates, except for Mr. Royer who commenced his employment    
with the Company as Chief Operating Officer in February 1997.                   

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS WITH DIRECTORS AND OFFICERS      

Except as set forth below or as provided under "SPECIAL FACTORS--Interests  
of Certain Persons in the Merger; Potential Conflicts of Interest", since       
January 1, 1997, the Company's executive officers and directors were not        
indebted to, and did not have significant business relations with, the          
Company.                                                                        

Until December 15, 1997, the Company leased approximately 18,700 square feet
of office space located at 605 Third Avenue, New York, New York for a period    
of ten years from an affiliate of CL Associates and an unaffiliated third       
party. Under this lease, the Company was obligated to pay approximately         
$542,000 per year for each of the first five years, and approximately $600,000  
per year for each of the last five years, of the term of the lease for the use  
of such office space. The Company terminated its lease with such affiliate of   
CL Associates and such other unaffiliated third party, effective December 15,   
1997. No termination fees were required to be paid by the Company in            
connection therewith.                                                           

CERTAIN INFORMATION CONCERNING PARENT AND SUB 

Parent is a Delaware limited partnership that engages in the business of    
investing in debt and equity interests in real estate related assets and        
businesses. WH Advisors, L.L.C. acts as the sole general partner of Parent,     
and Whitehall IX/X, Inc. acts as the managing member of WH Advisors, L.L.C.     
Parent, Sub, WH Advisors, L.L.C. and Whitehall IX/X, Inc. are all affiliates    
of GS Group.                                                                    

Whitehall IX/X, Inc. is a subsidiary of GS Group. GS Group is a holding     
partnership that (directly and indirectly through subsidiaries or affiliated    
companies or both) is a leading international investment banking organization   
in the business of buying and selling securities, both foreign and domestic,    
and in making investments on behalf of its partners. The Goldman Sachs          
Corporation, a Delaware corporation ("GS Corp."), is the sole general partner   
of GS Group. The principal address and telephone number of Parent, Sub,         
Whitehall IX/X, Inc., GS Group and GS Corp. are 85 Broad Street, New York, New  
York 10004 and (212) 902-1000.                                                  

Except as described in this Proxy Statement, since the formation of the     
Company, there have been no contacts, negotiations or transactions between      
Sub, Parent or, to the best knowledge of Sub, any of its affiliates, on the     
one hand, and the Company or its affiliates, on the other hand, concerning a    
merger, consolidation or acquisition, a tender offer or other acquisition of    
securities, an election of directors, or a sale or other transfer of a          
material amount of assets.                                                      

FEES AND EXPENSES 

Except as provided in the Merger Agreement, whether or not the Merger will  
be consummated, each of Parent, Sub and the Company will pay its own expenses   
incident to preparing for, entering into and carrying out the Merger Agreement  
and the consummation of the transactions contemplated thereby, other than (i)   
the expenses incurred in connection with printing and mailing proxy materials   
to stockholders, which will be paid by the Company and (ii) real property       
transfer taxes, which will be paid by the Company. See "THE MERGER AGREEMENT--  
Termination."                                                                   

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MARKET PRICES AND DIVIDENDS 

MARKET PRICES                                                                   

The principal market on which the Shares are traded is NASDAQ under the     
ticker symbol "CHRT." The Shares commenced trading on NASDAQ on November 14,    
1994 under the symbol "NAGC." From January 1996 until August 8, 1996, the       
Shares traded under the symbol "NALC" and, since August 8, 1996, have traded    
under the symbol "CHRT." On February 5, 1998, the last trading day before the   
printing of this Proxy Statement, the high and low sales prices of the Shares   
were $16 15/16 and $16 15/16, respectively. On November 13, 1997, the last      
trading day before the public announcement of the execution of the Merger       
Agreement, the high and low sales prices of the Common Stock were $15 7/8 and   
$15 7/8, respectively. On